american professional constructor journal - october 2011

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The AMERICANPROFESSIONALCONSTRUCTORJOuRNal Of ThE amERiCaN iNsTiTuTE Of CONsTRuCTORs

in this issueConstruction Quality Assurance Using Ground Penetrating Radar

Limited Scope Permitting for Time-Sensitive Project Delivery Systems

Design of a Solar Power System

Investigating Leadership Characteristics of Project Managers across Project-Oriented Professions

LEED & Green Globes: A Project Owner Based Analysis

Subcontractor Default Insurance

OCTOBER 2011 | VOlumE 35 | NumBER 02

AIC 2011/2012Officers & Directors

PRESIDENTAndrew J Wasiniak, CPCWalbridge777 Woodward Ave., Suite 300Detroit, MI 48226Work Phone: (313) [email protected]

VICE PRESIDENTTanya C Matthews, FAIC, DBIATMG Construction CorporationPO Box 2099Purcellville, VA 20134-2099Work Phone: (540) 751-4465Fax: (540) [email protected]

SECRETARYMatthew A Conrad, CPCThe Christman Company3011 N. Cambridge Rd.Lansing, MI 48911Work Phone: (517) [email protected]

TREASURERPaul W Mattingly, CPCBosseMattingly Constructors, Inc.2116 Plantside Dr.Louisville, KY 40299-1924Work Phone: (502) [email protected]

Journal of the American Institute of Constructors

PURPOSEThe purpose of the American Institute of Constructors is to promote individual excellence throughout the related fields of construction.

MISSIONOur mission is to provide:

A qualifying body to serve the individual in construction, the Constructor,who has achieved a recognized level of professional competence;

Opportunities for the individual constructor to participate in the process ofdeveloping quality standards of practice and to exchange ideas;

Leadership in establishing and maintaining high ethical standards;

Support for construction education and research;

Encouragement of equitable and professional relationships between theprofessional constructor and other entities in the construction process; and

An environment to enhance the overall standing of the constructionprofession.

AIC PAST PRESIDENTS1971-74 Walter Nashert, Sr., FAIC

1975 Francis R. Dugan, FAIC

1976 William Lathrop, FAIC

1977 James A. Jackson, FAIC

1978 William M. Kuhne, FAIC

1979 E. Grant Hesser, FAIC

1980 Clarke E. Redlinger, FAIC

1981 Robert D. Nabholz, FAIC

1982 Bruce C. Gilbert, FAIC

1983 Ralph. J. Hubert, FAIC

1984 Herbert L. McCaskill Jr.,FAIC

1985 Albert L Culberson, FAIC

1986 Richard H. Frantz, FAIC

1987 L.A. (Jack) Kinnaman, FAIC

1988 Robert W. Dorsey, FAIC

1989 T.R. Benning Jr., FAIC

1990 O.L. Pfaffmann, FAIC

1991 David Wahl, FAIC

1992 Richard Kafonek, FAIC

1993 Roger Baldwin, FAIC

1994 Roger Liska, FAIC

1995 Allen Crowley, FAIC

1996 Martin R. Griek, AIC

1997 C.J. Tiesen, AIC

1998-99 Gary Thurston, AIC

2000 William R. Edwards, AIC

2001-02 James C. Redlinger, FAIC

2003-04 Stephen DeSalvo, FAIC

2005-06 David R. Mattson, FAIC

2007-09 Stephen P. Byrne, FAIC, CPC

2009-11 Mark E. Giorgi, AIC

aiC 2011/2012Board of Directors

Robert W Arnold, CPCNational Director (Elected 2009-2012)ASCO Hardware Company, Inc1409 Osage Dr.Redfield, AR 72132-9526Work Phone: (501) 376-6858Email: [email protected]

Mr. Bernard J Ashyk, Jr.National Director (Appointed – N. Ohio)Shook Inc. Northern Division10245 Brecksville Rd.P.O. Box 41020Brecksville, OH 44141-0020Work Phone: (440) 838-5400 x8005Email: [email protected]

Dennis C Bausman, FAIC CPC PhDNational Director (Elected 2011-2014)126 Lee HallClemson, SC 29634-0001Work Phone: (864) 656-3919Email: [email protected]

David J. Bierlein, CPCNational Director (Elected 2011-2014)TMG Construction CorpPO Box 2099Purcellville, VA 20134Work Phone: (800) 610-9005 x4499Email: [email protected]

Paul Michael Byrne, ACNational Director (Elected 2009-2012)6411 Lange CircleDallas, TX 75214-2443Work Phone: (214) 878-1634Email: [email protected]

Matthew A Conrad, CPCAIC Secretary The Christman Company3011 N. Cambridge Rd.Lansing, MI 48911Work Phone: (517) 482-1488Email: [email protected]

Mr. Allen L Crowley, Jr., FAICNational Director (Elected 2010-2013)COR Services16781 Chagrin Blvd.Suite 225Cleveland, OH 44122Work Phone: (216) 406-2364Email: [email protected]

Joseph DiGeronimoNational Director (Elected 2011-2014)Precision Environmental Co.5500 Old Brecksville Rd.Independence, OH 44131-1508Work Phone: (216) 642-6040

Email: [email protected]

Dr. Edward Terence Foster, CPC PhD PE FAICNational Director (Elected 2011-2014)University of Nebraska1014 N 67th CircleOmaha, NE 68132-1110Work Phone: (402) 554-3273Email: [email protected]

Michael Allen Garrett, CPCNational Director (Elected 2009-2012)BMF Construction Services, Inc.2060 Miles Woods Dr.Cincinnati, OH 45231Work Phone: (513) 515-9135Email: [email protected]

Mr. Mark E GiorgiNational Director (Elected 2010-2013)PresidentErie Affiliates, Inc29017 Chardon Rd., Ste. 200Willoughby Hills, OH 44092-1405Work Phone: (440) 943-5995Email: [email protected]

Mike W Golden, AIC CPCNational Director (Elected 2011-2014)PresidentMW GOLDEN CONSTRUCTORSPO Box 338Castle Rock, CO 80104-0338Work Phone: (303) 688-9848Email: [email protected]

Mark D. Hall, CPCNational Director (Elected 2009-2012)Hall Construction Co., IncPO Box 770Howell, NJ 07731-0770Work Phone: (732) 938-4255Email: [email protected]

Larry C Hiegel, CPCNational Director (Elected)10914 Panther Mountain Rd.Maumelle, AR 72113Work Phone: (501) 851-7484Email: [email protected]

John R Kiker, III, CPCNational Director (Appointed—Tampa)Kiker Services Corp1501 Missouri Ave.Palm Harbor, FL 34683-3642Work Phone: (727) 787-8877Email: [email protected]

Tanya C Matthews, FAIC, DBIAAIC Vice PresidentPresidentTMG Construction CorporationPO Box 2099Purcellville, VA 20134-2099Work Phone: (540) 751-4465Fax: (540) 338-9518Email: [email protected]

Paul W Mattingly, CPCAIC TreasurerBosseMattingly Constructors, Inc.2116 Plantside Dr.Louisville, KY 40299-1924Work Phone: (502) 671-0995Email: [email protected]

Hoyt Monroe, FAICNational Director (Elected 2010-2013)Vice PresidentClark Power CorporationPO Box 45188Little Rock, AR 72214-5188Work Phone: (501) 558-4901Email: [email protected]

Mr. Bradley T Monson, CPCNational Director (Elected 2010-2013)Tierra Group, LLC182B Girard St.Durango, CO 81303Work Phone: (970) 375-6416Email: [email protected]

Wayne Joseph Reiter, CPC CPANational Director (Elected 2011-2014)Reiter Companies110 E Polk St.Richardson, TX 75081-4131Work Phone: (972) 238-1300Email: [email protected]

Bradford L Sims, PhDNational Director (Elected 2010-2013)The Kimmel School of Constr. Mgmt. & Tec211 Belk BuildingCullowhee, NC 28723Work Phone: (828) 227-2175Email: [email protected]

Mr. Andrew J Wasiniak, CPCAIC PresidentWalbridge777 Woodward Ave., Suite 300Detroit, MI 48226Work Phone: (313) 221-1013Email: [email protected]

THE AMERICANPROFESSIONALCONSTRUCTORVolume 35, Number 02 October 2011

articles

Construction Quality Assurance Using Ground Penetrating Radar ................................5George Morcous, Ph.D, PE., University of Nebraska-Lincoln

Limited Scope Permitting for Time-Sensitive Project Delivery Systems......................12Wayne Jensen, Ph.D, PE, Bruce Fischer, AIA, CPE and Zhigang Shen, Ph.D, CPC,

Durham School at the University of Nebraska

Design of a Solar Power System..................................................................................21John A. Gonzalez and Maged K. Malek, Ph.D, AM.ASCE

Investigating Leadership Characteristics of Project Managers across Project-Oriented Professions ......................................................................................30

Mary Sumner, Professor and Doug Bock, Professor,

School of Business, Southern Illinois University Edwardsville

LEED & Green Globes: A Project Owner Based Analysis ..............................................40Daniel R. Warren and Shima N. Clarke, PhD., Clemson University

Subcontractor Default Insurance (SDI) ........................................................................45Dennis C. Bausman, PhD, FAIC, CPC, Clemson University

The American Professional Constructor (ISSN 0146-7557) is the official publication of the American Institute of Constructors (AIC),P.O. Box 26334 Alexandria VA 22314. Telephone 703.683.4999, Fax 703.683.5480, www.professionalconstructor.org.

Subscription rates: This subscription includes 2 copies of The American Professional Journal in digital PDF copy for the year for$112.00 USD.

Published in the USA by the American Institute of Constructors Education Foundation, and copyrighted by the American Instituteof Constructors.

This publication or any part thereof may not be reproduced in any form without written permission from AIC. AIC assumes noresponsibility for statements or opinions advanced by the contributors to its publications. Views expressed by them or the editor donot represent the official position of the The American Professional Constructor, its staff, or the AIC.

The American Professional Constructor is a refereed journal. All papers must be written and submitted in accordance with AICjournal guidelines available from AIC. All papers are reviewed by at least three experts in the field.

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OCTOBER 2011 — Volume 35, Number 02The American Institute of Constructors | 700 N. Fairfax St., Suite 510 | Alexandria, VA 22314 | Tel: 703.683.4999 | www.professionalconstructor.org

Construction Quality assurance using Ground Penetrating Radar

George Morcous, Ph.D, PE., University of Nebraska-Lincoln

Keywords:Non-destructive evaluation, concrete inspection, pavement,insulated concrete forms

INTRODUCTION

Ground Penetrating Radar (GPR) is a non-destructiveevaluation (NDE) technique that involves thetransmission of electromagnetic waves into the materialunder investigation. The reflections of these waves atinterfaces and objects within the material are analyzedto determine their location (horizontal distance from areference point) and depth (vertical distance from thesurface). GPR can also be used to differentiate layers ofmaterial and determine certain properties of thematerials, such as their dielectric constants orconductivity for electromagnetic waves. GPR has beensuccessfully used in various applications, such asidentifying location and orientation of reinforcing bars,detecting delaminated concrete in bridge decks, andlocating changes in pavement structure (Maser 1996;Maierhofer 2003).

Determining the thickness of the surface layer inPortland Cement Concrete Pavement (PCCP) is crucialfor construction quality assurance of new pavementsand structural evaluation of existing pavements.

Traditionally, State Departments of Transportation(DOTs) use drilled concrete cores to measure thethickness of the concrete layer for PCCP according toASTM C174 (ASTM 2006). Although concrete cores areaccurate and cost-effective means for measuring thethickness of concrete pavement, they have severaldisadvantages: 1) drilling a core is a destructiveevaluation method that affects strength and durabilityproperties of the concrete pavement; 2) core extractionand hole filling with mortar are tedious and timeconsuming operations; and 3) cores extracted every1000 ft provide inadequate information about thevariability of concrete thickness in the longitudinaland/or transversal directions. Despite the fact thatconcrete cores are indispensible for evaluatinghardened concrete properties, such as compressivestrength, air content, and aggregate segregation, thenumber of extracted cores is mostly controlled bythickness evaluation specifications. Therefore, there isa great need for a NDE method that can significantlyreduce the number of drilled cores while providingDOTs with a comparably accurate and cost-effectivethickness measurement.

Insulated Concrete Form (ICF) walls have beenincreasingly used as an excellent alternative totraditional wall construction. ICF walls are attractive to

aBsTRaCT: Ground Penetrating Radar (GPR) is a non-destructive evaluation technique that has been successfullyused in several transportation applications, such as subsurface exploration and condition assessment. The main objectiveof this research was to present the use of GPR as a quality assurance technique in construction projects. Two applicationsare presented in this paper: 1) measuring the thickness of concrete pavement; and 2) inspecting insulated concrete form(ICF) walls. A high resolution 1.6 MHz ground coupled antenna was used to perform grid scans and measure concretethickness in several pavement projects and locate air voids and reinforcing bars in ICF walls. Results indicated that GPRis an efficient and reliable technique that can determine the thickness of concrete pavement with an accuracy of 3 mm(1/8 in.) and detect air voids as small as 38 mm (1.5 in.) in ICF walls.

Dr. George Morcous is an associate professor at Durham School of Architectural Engineering and Construction at the University of Nebraska-Lincoln since January 2005. He has a B.S. and M.S. degrees in Civil Engineering from Cairo University-Egypt. He earned his doctorate degree from Concordia University – Canada in 2000. He is currently a registered professional engineer in Nova Scotia – Canada and in the State of Nebraska, His research and teaching interests include design, construction, and evaluation of reinforced and prestressed concrete structures and bridge engineering.

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both owners and contractors due to their excellentthermal and structural performance, in addition tosignificant labor savings and speed of construction(Doebber and Ellis, 2005). However, potential voids inICF walls, especially around plastic ties, reinforcingbars, and form corners, have been reported as a resultof poor concrete consolidation. These voids could haveserious negative impact on the durability, thermalefficiency, and structural performance of ICF walls(Gajda and Dowell, 2003).

The problem of inadequate concrete consolidation inICF walls is aggravated by the difficulty of detectingthe voids in such a system. ICFs are permanent formsthat cover the entire surface of the wall, which preventsany visual inspection of the concrete unless the ICFs areripped off. Moreover, NDE techniques, such as impactecho and infrared thermograph, are not very effectivein detecting voids in ICF walls due to the thermal andsound insulation properties of the foam Therefore,there is a great need for a practical, efficient, andreliable NDE technique for inspecting ICF walls toensure the proper consolidation of concrete andidentify the location, extent, and severity of air voids ifexist.

This paper presents the research carried out toinvestigate the use of GPR as a quality assurancetechnique for thickness measurement in concretepavement and void detection in ICF walls. The nextsection summarizes the basic principles of GPR. Thethird section presents the field investigations conductedto evaluate the accuracy of GPR in thicknessmeasurement of concrete pavement. The forth sectionpresents experimental work conducted to evaluate thereliability of GPR in ICF void detection. The last sectionsummarizes research conclusions.

GROUND PENETRATING RADAR PRINCIPLES

GPR is the propagation of short pulse radar waves(pulse duration less than 1 ns) through the layers ofmaterials under investigation. Radar signals areemitted via an antenna into a structure composed ofdifferent materials (e.g. EPS and concrete) and reflectedat the interfaces between the materials and theirinterfaces with the surrounding medium (Maierhofer

2003). From the electromagnetic standpoint, materialscan be categorized as follows: a) metallic, and b)dielectric. Metallic materials have high conductivityand attenuate electromagnetic waves to a great extentresulting in shallow penetration, while dielectricmaterials, such as concrete, have low conductivity andattenuate electromagnetic waves to a limited extentresulting in deep penetration (Barnes and Trottier 2000).The relative dielectric constant of a particular material(εr, sometimes called relative permittivity) is the ratioof permittivity of the material to permittivity ofvacuum (ε0 = 8.854 x 10-12 F/m). Although the transitionfrom metallic to dielectric is gradual, this relativepermittivity is used to indicate the nature of thematerial (high value for metallic and low value fordielectric). The propagation velocity (υ) of atransmitted radar signal through a material is afunction of its relative permittivity (εr) and relativemagnetic permeability (mr) as follows:

[1]

In low-loss materials, as most of the dielectric materials,the relative magnetic permeability (mr) can be assumedto be unity. Therefore, if the relative permittivity of thematerial under investigation is known, the propagationvelocity can be calculated using Equ. 1. Thepropagation velocity of the waves within specificmaterials is then used to determine the thickness ofeach material layer using the two-way travel timerecorded by the GPR antenna. The difference in timebetween the reflected signals at the top and bottominterfaces of the layer times the velocity gives thedistance traveled by the wave, i.e. the thickness of thelayer. It should be noted that relative permittivity of amaterial is frequency-dependent and is influenced byparameters, such as the temperature, moisture, and saltcontent of the material.

When the incident signal meets the interface betweentwo materials with different dielectric constants, partof the incident energy is reflected, while the other partis transmitted. The amount of reflected and transmittedenergy is determined by the reflection and transmissioncoefficients (R and T respectively). These coefficientsare dependent on the relative impedance of the twomaterials (zr1, zr2), which are functions of the dielectric

Construction Quality Assurance Using Ground Penetrating Radar

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constant of the materials (εr1, εr2). These coefficientsare calculated as follows (Bungey and Millard 1993):

[2]

[3]

[4]

where mo = 4π x 10-7 H/m is the magnetic permeabilityof free space.

As can be deduced from equations 2, 3, and 4, thesmaller the difference in the dielectric constant of thetwo materials, the smaller the reflection coefficient andthe larger the transmission coefficient. As the incidentenergy continues to penetrate other materials andmeets successive interfaces, other reflections are sentback to the antenna and recorded over time to generatethe waveform. Measuring the time and amplitude ofreflections (peaks or valleys) in the waveform facilitatesthe determination of layer thickness and locatingembedded objects. It should be noted that there is atradeoff between the accuracy of detecting objects andpenetration depth. High frequency waves results inhigh resolution but low penetration and vice versa.

CONCRETE PAVEMENT THICKNESSMEASUREMENT

Several laboratory experiments have been conductedto estimate the accuracy of measuring the thickness ofconcrete pavement using GPR (Morcous and Erdogmus2010). These experiments indicated that GPR signalreflections at the interface between the bottom of theconcrete layer and the base layer are neither clear norreliable due to the proximity of the dielectric constantof the concrete and that of the base layer. The clarityand reliability of these reflections are significantlyimproved when metal objects are placed on the top ofthe base layer. Although GPR can accurately locatethese objects, it is recommended for rapid evaluationthat the objects be anchored properly so they do notshift while placing and/or vibrating the concrete. These

metals plates should be protected against corrosion fordurability purposes. The following sub-sectionsdescribe the field investigation conducted on twohighway projects.

Field Experiment #1The first field experiment was completed on June 30,2008 at the Fremont Bypass on Highway 30, in Fremont,NE. Eight GPR grid scans were performed at eightstations where zinc steel clad plates were placed on thecompacted base before paving. Figure 1 shows theinstallation of one plate. Each plate was 300 mm (11.8in.) diameter and 0.6 mm (0.025 in.) thick. At each platelocation, a 600 mm x 600 mm (2 ft x 2 ft) grid was placedand GPR grid scans were performed at 100 mm (4 in.)spacing. Setting up the GPR required about 20 minutes,while performing the eight grid scans required about40 minutes (a total of 1 hr). In all the locations, the steelplate placed at the interface between the bottom surfaceof concrete and the base layer was clearly detected asindicated by the strong signal reflections at the platelocation as shown in Figure 2.

Figure 1. Steel Plate Placed Underneath the Concrete Pavement

Figure 2. GPR Signal Reflections at the Steel Plate Location


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Cores were taken at all plate locations and actualconcrete thickness of the two cores located at plates # 2and # 7 were used to calibrate the GPR scans (i.ecalibration cores). The initial dielectic contant used inall the scans was assumed to be 6.25 (i.e. default initialvalue for dry concrete throughout the project). Theactual dielectic contant of the concrete was calculatedusing the known thickness of calibration cores. Thisvalue was found to be 7.23, which is higher than theinitial value due to the early age of the concrete and itshigher moisture content. The difference between theinitial and actual dielectric constants of the concreteresulted in a correction factor for GPR thicknessmeasurements of 0.93. This correction factor was usedto adjust GPR thickness measurements on theremaining six plates. Table 1 lists the GPR initialmeaurements, corrected measurements, and the actualthickness measured from extracted cores at the othersix locations (i.e verification cores). The average ofabsolute differences in the thickness measurement werefound to be approximetly 2.9 % when all readings wereconsidered. This average was re-calculated withoutreading #4 and found to be 1.4%. This is because theinconsistent and unreasonablly high difference inreading #4 was believed to be erroneous.

Table 1. Results of field experiment #1

Field Experiment #2Another field test was performed on the I-80 west of56th street in Lincoln, NE on August 28, 2009 at tendifferent stations. A 600 mm x 600 mm (2 ft x 2 ft) gridwas placed and GPR grid scans were performed at 100mm (4 in.) spacing at each station as shown in Figure 3. The steel plates placed at the interface between thebottom surface of concrete and the base layer wasclearly detected as indicated by the strong signalreflections shown in the wiggle diagram in Figure 4.

Figure 3. Scanning the Pavement at the Steel Plate Location

Figure 4. Radargram(Wiggle Mode) of the GPR Grid Scan at Steel Plate Location

Cores were taken from the ten scanned locations.Actual concrete thickness of two cores was used tocalibrate the GPR scans. The initial dielectic contantused in all the scans was assumed to be 6.25 (i.e.Equipment default value for fairly dry concrete). Theactual dielectic contant of the concrete was calculatedusing the known thickness of calibration cores and wasfound to be 7.07, which is higher than the initial valuedue to the early age of the concrete and its highermoisture content. The difference between the initial andactual dielectric constants of the concrete resulted in acorrection factor for GPR thickness measurements of0.94. This correction factor was used to adjust GPRthickness measurements at the remaining locations.Table 2 lists the GPR initial meaurement, correctedmeasurements, and the actual thickness measured fromextracted cores. The average of absolute difference inthickness measurement was found to be approximetly2.5 mm (0.1 in.), which corresponds to 0.75%.


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Table 2. Results of Field Experiement #2

VOID AND REINFORCMENT DETECTION IN ICF WALLS

Several laboratory experiments have been conductedto estimate the accuracy of measuring the thickness ofconcrete pavement using GPR (Morcous and Sekpe2010). These experiments indicated that signalreflections can detect, reinforcing steel, utility pipes,plastic ties, and large air voids. The field investigatedpresented in this study involve ICF panels produced byFox Blocks, Omaha, NE. Each panel is 1200 mm (48 in.)long, 400 mm (16 in.) high, and made of two layers ofEPS that are 63 mm (2.5 in.) thick each. The two EPSlayers are 150 mm (6 in.) apart and connected with sixplastic ties that are spaced 200 mm (8 in.) on centeralong the panel length. The panels were used in theconstruction of the 3-story hotel building shown inFigure 5. GPR surveys were conducted on all the ICFbearing lintels of the first and second floors during thesummer of 2007. All the exterior and interior walls ofthis building were made of 150 mm (6 in.) thick cast-in-place concrete ICF walls. According to the projectdrawings, walls are reinforced with no. 16 (#5) verticalbars at 1200 mm (48 in.) spacing on center and #4 (13mm) horizontal bars at 12 in. (400 mm) spacing oncenter. Bearing lintels are reinforced, as shown in Figure6, with 2 no. 13 (#4) horizontal bars located at 88 mm(3.5 in.) and 313 mm (12.5 in.) from the bottom of thelintel. Also, vertical no. 13 (#3) bars are used at 150 mm(6 in.) spacing on center in addition to 2 no. 16 (#5)vertical bars extending from each side of the opening.

Figure 5. ICF Building in Omaha, Nebraska

Figure 6. Typical Reinforcement of a Bearing Lintel

The same GPR equipment presented earlier in theconcrete pavement investigation was used to detect thehorizontal and vertical reinforcement and air voids ofthe first and second floor bearing lintels to avoidtearing down the permanent ICF. GPR grid scans wereperformed using the 3D data collection option, whenthe scanned surface is flat and smooth as shown inFigure 7. In few cases, where the ICF was damaged, linescans were used due to the difficulty of performing agrid scan. GPR data (i.e. radargrams) were analyzedusing the RADAN software and interpreted todetermine any discrepancies between the as-built andas-designed conditions. Also, the radargrams wereanalyzed to locate any substantial air voids in theconcrete lintels.


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Figure 7. GPR Grid Scan of an Exterior Lintel

Figure 8 shows the radargram of one of the exteriorlintels that was scanned using a 1600 mm x 400 mm (64in. x 16 in.) grid on the inside surface of the ICF. Theoverall quality of the radargram is good and it clearlyshows the reflections in both x-direction and y-directionscans. The y-direction scans indicate that the bottomhorizontal bar was located approximately 125 mm (5in.) from the bottom of the lintel as highlighted by thecircle. The top horizontal bar was not clearly identifiedbecause it was located outside the scanned area. The x-direction scans indicate that vertical bars were locatedat 200 mm (8 in.) spacing as highlighted by the oval. Nosignificant air voids were detected in this lintel.

Figure 8. Radargram of an Exterior Lintel

Figure 9 shows the radargram of one of the interiorlintels that was scanned using a 1000 mm (40 in.) x 400mm (16 in.) grid. The y-direction scans indicate that thebottom horizontal bar was located approximately 25mm (1 in.) from the bottom of the lintel as highlightedby the circle. The top horizontal bar was not detectedat all, which means it was missing. The x-directionscans indicate that vertical bars were located at 200 mm(8 in.) spacing as highlighted by the oval. No significantair voids were detected in this lintel.

Figure 9. Radargram of an Interior LintelScanning a total of 112 lintels of this building hadshown that GPR is a very efficient and cost-effectiveNDE technique. The total time required for one scanwas averaged at 10 minutes, while the scanning costper hour was estimated at $100. A small crew of onetrained labor and one helper was needed to perform thescans in addition to another trained person for dataanalysis. It should be noted that GPR is neither efficientnor cost-effective tool for scanning large areas (e.g.walls) or difficult to reach surfaces (e.g. exteriorelevated lintels) due to the need for continuous andaccurate grid scanning of the surface.

CONCLUSIONS

The experimental investigations and data analysisconducted in this study have led to the followingconclusions:1. GPR signal is an efficient technique for measuringthe thickness of concrete pavement when metal objectsare placed on the top of the base layer before paving tomake the reflections at the interface between the bottomof the concrete layer and the base layer clear andreliable.2. The average difference in concrete thicknessmeasurements using GPR and drilled cores was foundto be 0.15 in (3.8 mm) for 10 to 12 in. (254 - 305 mm)thick pavement. This represents a measurementaccuracy of 98.5%, which is very high. This accuracywas achieved through calibration, which requires theextraction of limited number of cores.3. GPR is an effective technique for detectingembedded objects in ICF walls. Grid scanning of theexterior surface of ICF specimen has shown signalreflections at the locations of all the embedded objects(i.e. reinforcing bars, air voids, and plastic ties).

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4. The clarity of the signal reflection in GPR scans ofICF lintels is highly dependent on the type, size andlocation of the objects. A 2.5 in. deep air void locatedclose to the scanning surface is easier to detect than a1.5 in. deep air void located far from the scanningsurface. Reinforcing bars are easier to locate than plasticties.

It should be noted that the main advantages of GPR areits accuracy and applicability to conditions wheretraditional inspection techniques are not feasible (e.g.ICF walls) in addition to being non-destructive. On theother hand, traditional inspection techniques areconsidered more economical and faster than GPR whenapplicable.

REFERENCES

ASTM (2006). Standard Test Method for Measuring Thickness

of Concrete Elements Using Drilled Concrete Cores, AmericanSociety for Testing and Materials, C174/C174M-06.

Barnes, C., and Trottier, J. (2000). Ground Penetrating Radar

for Network Level Concrete Deck Repair Management, ASCEJournal of Transportation Engineering, 126(3) 257-262.

Bungey, J. H., and Millard, S. G. (1993). Radar Inspection of

Structures, Proc. ICE Structures and Buildings, 99, 173-186.

Doebber, I, and Ellis, M.W., (2005). Thermal Performance

Benefits of Precast Concrete Panel and Integrated Concrete Form

Technologies for Residential Construction, ASHRAETransactions, 111, 340-352.

Gajda, J., and Dowell, A. M. (2003). Concrete Consolidation

and the Potential of Voids in ICF Walls, Portland CementAssociation (PCA), Research and Development BulletinRD134.

Maierhofer, C. (2003). Nondestructive Evaluation of Concrete

Infrastructure with Ground Penetrating Radar, ASCE Journalof Materials in Civil Engineering, 15(3), 287-297.

Maser, K. R (1996) Condition Assessment of Transportation

Infrastructure Using Ground-Penetrating Radar, ASCE Journalof Infrastructure Systems, 2(2), 94-101

Morcous, G., and Erdogmus, E. (2010). Accuracy of Ground

Penetrating Radar for Concrete Pavement Thickness

Measurement, ASCE Journal of Performance of ConstructedFacilities, 24(6), 610-621.

Morcous, G., and Sekpe, V. (2010). Inspection of Insulated

Concrete Form Walls Using Ground Penetrating Radar, ASCInternational Journal of Construction Education andResearch, 6(4), 303-317


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Keywords:Limited Scope Building Permit

INTRODUCTION

Delivery of construction projects in the United Stateshas traditionally been based upon the design-bid-buildsystem. This system has been used to create numerousimpressive structures, but it often proves expensive andusually requires considerable time, because design, per-mitting and construction are accomplished in sequen-tial order and do not overlap. Several alternatives tothe traditional system have been developed, many ofwhich fall under the classification of time-sensitiveproject delivery systems. The most commonly usedtime-sensitive project delivery systems are phased andfast-track construction (Fazio, Moselhi, Theberge &Revay 1988a). Figure 1 illustrates some of the majordifferences between traditional design-bid-build andtwo time-sensitive project delivery systems.

Phased construction is carried out by overlapping workpackages, such as excavation, foundations, structural steel,etc. Each work package is completed by the designer(s) in chronological sequence, with early activities beginning (or sometimes completed) before design is finalized for later work. Design and construction


limited scope Permitting for Time-sensitive Project Delivery systems

Wayne Jensen, Ph.D., P.E., Bruce Fischer, AIA, CPE, Zhigang Shen, Ph.D., CPC, University of Nebraska-Lincoln

aBsTRaCT: The traditional system of obtaining legal permission (a permit) to construct a building was developedbefore the advent of time sensitive project delivery systems. The traditional system of permitting has proven quite effectivein safeguarding public safety, health and welfare, but the process can prove costly and time consuming, especially whenapplied to time-sensitive projects. Rather than creating an entirely new permit system to accommodate delivery of time-sensitive projects, municipalities are experimenting with limited scope permits, which allow completion of only thosespecific aspects of construction described within the permit. Limited scope permits offer distinct advantages for time-sensitive projects and can be used to more equitably distribute the risk associated with construction among the partiesdirectly involved.

Wayne Jensen has a Ph.D. in Civil Engineering from the University of Wyoming. He is a registered Professional Engineer in fivestates and currently works as an Associate Professor in the Construction Management Program of the Durham School at the University of Nebraska.

Bruce Fischer earned a Bachelor’s in Architectural Studies and a Masters of Architecture degree from University of Nebraska. He is a registered architect, an International Codes Council certified plans examiner and an Associate Professor in the ConstructionManagement Program of the Durham School at the University of Nebraska.

Zhigang Shen has a Ph.D. in Construction Management from the University of Florida and is a Certified Professional Constructor.He is an Assistant Professor in the Durham School of Architectural Engineering and Construction at the University of Nebraska-Lincoln.

Figure 1. Traditional and Time Sensitive Project Delivery Systems

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within a single work package do not overlap (Fazio,Moselhi, Theberge & Revay 1988b).

Fast-tracking is accelerated phased construction. Design and construction activities within individualwork packages are overlapped to further reduce projectduration (Fazio et al 1988b). Since the total scope ofwork for some activities is unknown until relatively latein the design process, bidders must often formulate estimates based, at least partially, upon anticipatedquantities. When fast-tracking a project for construc-tion, the owner must ensure that contract documentscompleted later in the design process are consistentwith documentation used to begin actual construction.

Time-sensitive construction focuses on integrating design,permitting, and construction schedules to capture some ofthe time lost in the traditional design-bid-build environ-ment. Time-sensitive construction does not shorten thelength of time required to complete the individual tasks ofcreating plans and drawings, acquiring building permits,or actual construction. Instead, design and constructionprofessionals are integrated into a collaborative environ-ment where many of these tasks can be completed (at leastsomewhat) concurrently.

Rather than the fragmented levels of responsibility whichexist under the traditional design-bid-build contracts,phased and fast track contracts often assign responsibilityfor all details of design and construction to a single entity.This contractual arrangement, known as design-build ordesign-construct, provides an integrated point-of-contactfor the owner, allowing him/her to contact one source withall questions and concerns. A single responsible entity doesaway with much of the finger-pointing that has become alltoo frequent on modern construction projects. Because de-sign and construction are performed by one organizationunder a single contract, claims for design errors and delaysare significantly reduced (FHWA 2011). Design-build hasa long history in various sectors of public and private con-struction. Its use has increased significantly in the UnitedStates during the past two decades (DBIA 2011).

Phased and fast-track construction, while not focusedon reducing construction cost, often produce savingsfor the owner and/or contractor. The combined effectsof paying for a construction loan (which usually has ahigher interest rate than more permanent financing)and an earlier completion date (which can save labor

hours) may enhance the overall profitability of a pro-posed project to the extent that an economically infea-sible endeavor can be transformed into reality (Russell& Ranasinghe 1991).

The traditional system of granting legal approval (apermit) to construct a project was, however, created inthe early 20th century. This system was designedspecifically to protect the public’s safety, health andgeneral welfare from less than adequate design, mate-rials and workmanship sometimes encountered whenusing the traditional design-bid-build project deliverysystem. The traditional building permitting system, al-though sometimes viewed as slow, cumbersome andexpensive, has proven itself versatile, flexible and re-sponsive to protecting the safety, health and well-beingof the public.

When applying for a traditional building permit, allplans, drawings and specifications must be completed,reviewed and approved prior to a full permit being is-sued. Under the limited scope permitting process nowbeing applied to many time-sensitive projects, construc-tion is divided into different work packages consistingof chronologically phased activities. Only the plans,drawings and specifications pertaining to a specificpackage must be completed, submitted and approvedprior to work beginning on activities within that pack-age (City of Lincoln 2008). An additional limited scopepermit is required for each subsequent work package.

The advantages inherent in time-sensitive constructionhave convinced many US municipalities to legally rec-ognize one or more of its variants as a legitimate deliv-ery system for new construction (City of Ithica 2000;Los Alamos County 2006). Other jurisdictions restricttime-sensitive construction to alteration or repair work(City of Columbus 2009). A third set of municipalitiesrecognizes that time-sensitive construction can be ap-propriate for both new construction and for renovationwork. The most common method of legally authorizingtime sensitive construction is use of a limited scope per-mit. The limited scope permitting process is being usedby other municipalities to encourage economic growthand competitive development. A faster and more effi-cient permit process designed to accommodate devel-oping and expanding businesses provides an incentivefor new business and industry to locate in the local areaand for existing businesses to expand (City of CollegeStation 2004).


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Municipalities are, however, reluctant to incur addi-tional liability as the result of limited scope permitting.The City of Lincoln’s building code specifies “…youwill receive only one set of plans endorsed by stamp in-dicating that you may, at your own risk, place footingsand foundations to grade level only and place under-ground utilities…”(City of Lincoln 2008). This wordingis an example of a municipality using the limited scopepermit to distribute risk among the contractor, de-signer(s) and owner. These three parties are assumingthe risk for placing utilities, foundations and/or foot-ings because the municipality has no method of check-ing whether or not the footings, foundations or utilitieswill conform to the minimum code specifications re-quired for the completed structure. The limited scopepermit thus protects the municipality should the utili-ties, footings or foundations not comply with parame-ters required by building code for the eventual use ofthe structure.

PROBLEM STATEMENT

Time and economic issues resulting from attempting toconstruct phased or fast track projects under thetraditional permitting system have caused manycontractors to advocate elimination of the traditionalbuilding permit system, at least for time sensitiveprojects. However, suggestions for a system to replacethe traditional process have generally lacked provisionsto protect public safety, health and well being to thesame extent as the traditional permitting process. Withonly a few minor modifications, a traditionalpermitting system can be adapted to function veryeffectively when applied to time-sensitive projects.

In many municipalities, the traditional building permitprocess is being supplemented by a limited scopepermit process, designed specifically to facilitate timesensitive project delivery schedules. Understandingthe similarities and differences between the traditionaland limited scope permitting processes is a crucial stepfor contractors who wish to successfully bid on time-sensitive projects. This paper explores, analyzes, anddocuments the general procedures adapted to createthe limited scope permitting process that is currentlybeing used in Lincoln, NE.

THE TRADITIONAL PERMITTING PROCESS

A design-bid-build project begins with research into thetype of structure proposed by the owner for a site. Theowner’s initial concept is subsequently modified byrequirements contained within various portions of theapplicable building codes. Zoning, land use, heightrestrictions, required setbacks, and many otherrequirements impact on the size, shape and design ofthe finished structure. Once an understanding of theproposed intent and restrictions has been establishedby the designers, a preliminary meeting is held wherethe design team meets and completes initialcoordination with local planning officials, buildingdepartment staff, fire and safety officials, etc.

Summarized typical procedures for obtaining abuilding permit under the traditional process areillustrated in Figure 2. The traditional process ofobtaining a building permit requires that a full set ofconstruction documentation be completed andsubmitted to the reviewing departments as part of thepermit application (Sections 105.3 and 106 IBC 2006).Construction documentation is normally completed byan architectural/engineering (A/E) firm selected by theowner. Once all construction documents have beencompleted, sets of plans and specifications aresubmitted to various code review agencies forapproval. The traditional process progressessequentially through Figure 2, with one or more loopswhere construction documents are reviewed anddeficiencies corrected.


Figure 2.Summarized TypicalProcedures Under theTraditional BuildingPermit Process

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Review of construction documents is normallycompleted by various municipal agencies (zoning,health, building, fire, mechanical, etc.) charged withspecific areas of responsibility.

When the plans, drawings and specifications have beenrevised or modified to the satisfaction of all agenciesresponsible for review and approved by those agencies,a (full) building permit is issued. Issuance of a fullpermit to the general contractor allows subcontractorsto apply for and draw permits for plumbing,mechanical, electrical, etc. which pertain to the scope ofthose specializations within the structure. Only withthese permits in hand can construction work finallycommence (Section 105.3 and 106.6.1 IBC 2006).

Compliance with the applicable building codes is checkedby various municipal agencies periodically duringconstruction. Once construction has been essentiallycompleted, final code compliance inspections arescheduled and conducted. When the building has beencertified by all municipal agencies to comply withapplicable code requirements, a “certificate of occupancy”is issued to the general contractor or to the owner (Section110.1 and 110.2 IBC 2006).

The traditional permit process is sequential in natureand mandates completion of the entire design processbefore plan review and subsequent construction canbegin. Plans, specifications and drawings must becompleted, submitted for review and approved beforea building permit will be issued. A (full scope) buildingpermit must be obtained by the general contractorbefore subcontractors can draw permits for specializedconstruction. Both the general contractor andsubcontractors must have permits in their possessionbefore construction can begin. The sequential nature ofactivities in the traditional process provides a systemof checks and balances to protect the public’s safety,health and welfare but adds significant time andexpense to the construction process.

LIMITED SCOPE PERMITTING FOR TIME SENSITIVE PROJECTS

Limited scope permitting begins in a manner similar tothe traditional process. However, the limited scopeprocess commonly involves several coordination

meetings during initial project planning where municipalagency officials serve as ad hoc members of the projectdevelopment team. The result of these meetings is a codeassessment, which briefly but fully summarizes theprimary code requirements affecting the structure. Thiscode assessment is then submitted to municipal agencies(zoning, health, building, fire, mechanical, etc.) forpreliminary review (Section 106.3.3 IBC 2006).

Once agencies have completed their reviews and theassessment has received preliminary approval, thedesign team begins work on preparing constructiondocuments for limited scope work packages. At thispoint, the limited scope (permit) process radicallydiverges from the traditional process (Figure 3).

Figure 3. Summarized TypicalProcedures Under a Limited Scope Building Permit Process

Whereas when applying for a traditional permit allconstruction documentation must be submitted andapproved prior to a full permit being issued, under thelimited scope permitting process only documentationpertaining to the scope of work for a specific phase isrequired. Thus, if a partial permit is sought for placementof footings and a slab on grade, the scope required to becovered by detailed design drawings might include onlythe locations of underslab utilities, foundation design, andstructural details of the slab itself.

An example of a typical application for a limited scopepermit (in Lincoln, NE) is shown in Figure 4. In the


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upper right hand corner, the requester has indicatedthat a limited scope permit is requested, versus a full(scope) or final permit. Requesting a full scope or finalpermit requires that all design work on the project becompleted, whereas this limited scope permit requiresonly a partial set of plans. The “shell only” option refersto a limited scope permit that allows the contractor tocomplete only specified structural and exterior aspectsof construction. Under the “shell only” option, interiorfinish work is expected to be completed at a later dateunder another limited scope permit possibly by adifferent contractor.

Figure 4. Sample Completed Application for a Limited Scope Building Permit

Questions immediately below the contact informationaddress how the requestor wishes to be informed of anyquestions, problems or the status of his/her permit ap-plication. The requester can have information faxed di-rectly to his/her office (as indicated on the form) orretrieve the information directly from the municipal PlanReview Section’s website. The scope of work requestedunder this limited scope permit is listed under Descrip-tion/Scope of Limited Permit near the middle of the leftcolumn. Only footings, the foundation and structuralsteel framing were included in the scope of work out-lined by this request for a limited scope permit.

The municipal departments responsible for certifyingthat submitted plans, drawings and specifications meetthe applicable building codes have been checked alongthe bottom of the form (Figure 4) by the municipal PlanReview Section when the permit number was assigned. Submission of an application for a building permitresults in a Permit Number being assigned (B1000946on the form shown in Figure 4), which is then enteredinto an electronic database called Permits Plus®.Permits Plus® is linked to a website at the localcity/county building which is available online 24-hoursa day for contractors and building department staff.Permits Plus® provides continuously updatedinformation showing what applications have beenreceived, which municipal departments have beentasked to review each application and what the statusof each department’s review is at any given time.

Figure 5 shows the Permits Plus® screen pertaining to thestatus of the permit requested in Figure 4, with separatefolders for each of the various municipal departmentstasked with reviewing the limited scope permitapplication. Folders are shown in a closed (versus open)status, indicating that each department has completed itsinitial review. Fire prevention, structural and utilities departments have approved theplans/drawings/specifications as submitted (indicated bythe lighter coloring of those folders and in the folder detailnear the bottom of the screen), while the building/zoningand special permit/user permit departments arerequesting additional information or have noteddeficiencies in the plans/drawings/ specifications(indicated by the darker coloring of those folders and inthe folder detail near the bottom of the screen).

Figure 5. Database Showing Status of Limited Scope Building Permit


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Contractors can learn what additional information wasrequested or what deficiencies were noted by a specificmunicipal department by double clicking on theappropriate folder. Figure 6 shows discrepancies notedduring a code inspection for fire safety. Each discrepancyhas a unique number assigned, which is correlated to oneor more drawing(s) and location(s) within the structure.Suggested corrections to discrepancies are noted as are thesections of the appropriate code which pertain to thecomments annotated.

Figure 6. Discrepancies Identified by a Fire Safety Code Inspection

Once discrepancies have been addressed and/orrequested information provided to satisfy thedepartments tasked with reviewing the submission, allfolders appear lighter colored (Figure 7) and indicate“approved” in the folder details near the bottom of thescreen. A limited scope permit will then be issued to thecontractor.

Figure 7. Database Showing Approval of Limited Scope Building Permit

Aspects of design not include in the initial limited scopepermit for this project were submitted at a later date onanother (limited scope permit) application. Thebuilding permit number was identical, but the

Description/Scope of Limited Permit was verydifferent since the second permit covered mechanical,electrical and plumbing systems plus the building’sinterior finishes and its exterior curtain wall.Construction of a building using the limited scopepermitting process normally requires at least two andsometimes significantly more cycles through thelimited scope permitting process (Figure 3) to obtainapproval covering the full scope of work.

Plans, drawings and specifications for a limited scopepermit can often be scrutinized by a smaller number ofreviewers (with responsibility only for the areascovered within a specific permit application), soapproval under the limited scope procedures is oftengranted much more quickly than is possible using thetraditional system. Issuance of a limited scope permitindicates that the work covered by specific partialdesign drawings, plans and specifications meetsbuilding code requirements. Compliance inspections,identical to those occurring when constructing a projectusing the traditional permit system, are conducted asconstruction progresses.

Development of the construction documentationrequired for limited scope permit applications to coverall details of a single structure usually takes place overseveral months or years. One person from the designor development team is normally placed in charge ofmonitoring and controlling this process. Additionally,a consistent method for posting as-built modificationsto all documents must be established and adhered tothroughout construction. Both the design team and thecontractor share responsibility for compiling andsubmitting the documentation required for final permitapproval.

Eventually the full scope of work will have beendesigned and permitted under two or more limitedscope permits. Before final code compliance inspectionscan begin, all limited scope permits must be convertedinto a single full scope permit. This process wasinitiated by submitting another building permitapplication (Figure 8) requesting a full (or final) permit.The permit number in Figure 8 (for the full scopepermit) is identical to the permit number in Figure 4(for a limited scope permit). No information isprovided under the Description/Scope of Limited


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Permit, indicating that the applicant is requesting thatall limited scope permits (issued under this permitnumber) be converted into a single full scope permit.Included with the final permit application are three fullsets of plans and drawings illustrating how workallowed under the limited scope permits complied withapplicable building code provisions.

Figure 8. Application for a Final (Full-Scope) Building Permit

Submitted documentation was again scrutinized by thevarious municipal departments (checked at the bottom ofFigure 8) within the Plan Review Section. The mechanical,electrical and plumbing departments were added asreviewers because of a later limited scope permit. Figure9 shows the permit status by the various municipaldepartments for the full scope permit. The screen indicatesthat all agencies have granted approval (indicated by thelighter color folders) based on the full scopedocumentation, with the exception of building/zoningand special permit/user permits. Once these twodepartments receive the information requested or note thatdiscrepancies have been resolved and grant their approval,the database will display that information by changing thedepartmental icons (folders) to the lighter color anddisplaying “Approved” in the folder detail near the bottomof the screen.

Figure 9. Database Showing Status of Final (Full-Scope) Building Permit

Theoretically, if only the work authorized by the limitedscope permits has been accomplished and the entirescope of work was included in the initial codeassessment when it received preliminary approval, theprocess of obtaining a full scope permit will proceedvery smoothly. In reality, modifications to design madeduring construction often require interpretation ofcodes and sometimes require changes to completedconstruction work. Once approval has been obtainedfrom the appropriate municipal agencies, all limitedscope permits can be combined into a single full scopepermit by the Plan Review Section. Final codecompliance inspections can then be conducted and,if/when these are successful, a certificate of occupancywill be issued.

Limited scope permitting has become well enoughknown and so frequently applied in one form oranother that it is now referenced in many buildingcodes. Construction documentation requirementspertaining to phased approval are discussed within theInternational Building Code Section 106 (IBC 2006).Section 106.3.3 specifically addresses limited scope(phased) permitting.

A MORE COMPLICATED CASE OF LIMITED SCOPE PERMITTING

Southwest High School in Lincoln Nebraska was a $40million project consisting of approximately 344,800 ft2of institutional space. Planning began eight monthsbefore the first limited scope footing and foundationpermit was issued. The preconstruction processcentered around development of a code assessment,


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which summarized the code requirements affecting thestructure. City permitting staff met monthly (or moreoften) as ad hoc members of the design team, workingwith construction and design professionals to create adocument that reflected institutional needs, coderequirements and the designer’s and owner’spreferences. Design was subdivided into nine separatemodules based upon location within the structure,corresponding to the letters A-J in Figure 10.

Figure 10. Design Modules and Limited Scope Permit Areas for Lincoln SW High School

To facilitate applying for limited scope permits andcoordinating work within the space available, requests for(limited scope) building permits were submitted basedupon five spatial areas. Design modules A & D, C, G, & Jand F & H were combined to create permit areas 1, 2 and3 respectively. Design module B was submitted as permitarea 3 while design module E was submitted as permitarea 4. Within each of the five permit areas, separatelimited scope permits were requested for five differentscopes of work: 1) footings, foundations and undergroundutilities, 2) mechanical, electrical and plumbing (MEP)systems below grade, 3) above grade structural work, 4)the architectural envelope and 5) above grade MEP andabove grade finish work. With five separate areas and fivedifferent scope of work permits requested per area, a totalof twenty-five different (limited scope) permits wereissued during the construction process.

Actual construction took place between October 2000 andAugust 2002, with twenty-two months between issuanceof the first limited scope permit and occupancy of thebuilding by Lincoln Public Schools. The project managerfor Sampson Construction (the general contractor for theproject) estimated that construction would have requiredat least one additional year had the traditional permittingprocess have been used in lieu of limited scope permitting(C. Geis, personal communication June 8, 2009).

PROBLEMS WITH TIME-SENSITIVE PROJECT DELIVERY SYSTEMS

Accelerating time schedules through phased or fast-trackconstruction can actually delay completion of constructionprojects if not judiciously applied. Constructionprofessionals inexperienced in phased construction (orfast-tracking) who choose to adopt these techniques oftenexperience serious problems. Fazio et al. (1988b) cites a casestudy where 66% of total project delays were attributedeither directly or indirectly to attempting to fast-track thedelivery schedule. Spending an additional two months ondetails of specific design packages before awarding thecontracts would have eliminated more than seven monthsof delay. Without the revisions and extra work caused byattempting to accelerate the delivery schedule, duration ofthis project and the resulting productivity loss would havebeen significantly reduced.

Phased or fast-track construction is not a solution forcommon construction communication problems andshould generally be utilized only after carefulconsideration. Project documentation will definitely bemore complicated with multiple limited scope permits,each of which must be requested, monitored, updatedand finally converted into a full scope permit. Theprocess of converting numerous limited scope permitsinto a single full scope permit can be a long andarduous task, especially if accurate documentation foreach step in the process has not been maintained. Afinal permit may never be issued if construction hasdeviated significantly from the code assessment thatreceived preliminary approval.

SUMMARY

Understanding the permitting process is a critical step forcontractors toward successful completion of anyconstruction project. The traditional permitting system hasserved well to protect public welfare, health and safety, butit was not designed to accommodate the newer projectdelivery systems used with time-sensitive construction.Suggestions for systems to replace the traditional permitprocess have generally lacked provisions to protect publicwelfare, health and safety to an extent equivalent to thetraditional process.


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Rather than discarding it, many municipalities aremodifying the traditional building permit process byallowing the use of some form of limited scope permitting.With only minor modifications, the traditional permittingsystem can be effectively applied to time-sensitive projects.Limited scope permitting, if correctly applied andconscientiously used, can save the owner and thecontractor significant time and money. Limited scopepermitting also allows municipalities to more equitablydistribute risk among the parties who have direct controlover the construction process. Limited scope permitting is not a project delivery system,but is instead a set of administrative procedures adaptedfrom the traditional permitting process to support fast-track and phased project delivery systems. Limited scopepermitting allows project planning, design andconstruction to be completed more expeditiously. Timeand money saved results from the use of expeditedprocedures associated with phased or fast-trackconstruction methods, not from limited scope permitting.Limited scope permitting validates phased or fast-trackconstruction procedures by providing a degree ofprotection for the general public’s health, safety andwelfare equivalent to that achieved when using thetraditional permit system.

Methods of subdividing a structure into phases forplanning, design and construction vary tremendously fordifferent owners, designers, contractors, site conditions,and methods of financing. Possibilities are limited only bythe imagination of the individuals involved. Mostsuccessful solutions are unique for a specific project andare the result of careful consideration by all partiesinvolved in the planning, design and constructionprocesses.

A limited scope permit authorizes construction of only thescope contained within that specific document. Before finalcode inspections can be completed, all limited scopepermits must be incorporated into a single full scopepermit. It is the responsibility of the designers andcontractor(s) to maintain and submit documentation forlimited scope permits with all modifications in a timelymanner so that a full permit can be issued expeditiously.A limited scope permitting process similar to the exampleoutlined in this paper can serve as a practical and easy-to-incorporate supplement to most traditional permittingprocesses. Adoption of a limited scope permittingprocedures has the potential to save contractors, designers,

and building owners significant time and money, whilemore equitably distributing risk among the parties directlyinvolved in the construction process. Limited scopepermitting procedures can also serve as an incentive toencourage economic development and relocation orexpansion of industry into a local area.

REFERENCES

Design-Build Institute of America (DBIA). (2011). Retrieved on7/20/2011 from http://www.dbia.org/about/designbuild/.

City of Columbus. (2009). Department of Development, BuildingServices Division, 757 Carolyn Avenue, Columbus, OH. Retrievedon 6/22/2009 from http://development.columbus.gov?Asset/iu_files/BSD/PDF/Building_Forms/New_Building_Permit.pdf.

City of College Station. (2004). Planning and Zoning Commission,City of Bryan and City of College Station, TX. Retrieved on12/08/2009 from http://www.cstx.gov.Index.aspx?page=2311.

City of Ithica, NY. (2000) NY. Site Review Plan Application.Retrieved on 6/21/2009 from http://www.cityofithaca.org/vertical/Sites/%7B5DCEB23D-5BF8-4AFF-806D68E7C14DEB0D%7D/uploads/%7B12764438-4F56-427C-9D49-892DCD65556F%7D.pdf.

City of Lincoln, NE. (2008). Building and Safety Department,Lincoln, NE. Retrieved on 6/21/2009 fromhttp://lancaster.ne.gov/city/build/comercl/limited.htm.

Fazio, P., Moselhi, O., Theberge, P & Revay, S. (1988a). Designimpact of construction fast-track, Construction Management andEconomics, 5, 195-208.

Fazio, P., Moselhi, O., Theberge, P & Revay, S. (1988b). FastTracking of construction projects project: A case study. CanadianJournal of Civil Engineering, 15, 493-499.

Federal Highway Administration (FHWA), (2011). Retrieved on7/20/2011 from http://www.fhwa.dot.gov/everydaycounts/projects/methods/intro.cfm.

International Building Code. (2006). Sections 105, 106 and 110.International Codes Council.

Los Alamos County. (2006). Los Alamos County CommunityDevelopment Department Building and Inspection Division, Los Alamos, NM. Retrieved on 6/29/2009 fromhttp://www.losalamosnm.us/cdd/Documents/CommercialPermits/LtdScopelPac112806.pdf.

Russell, A. & Ranasinghe M. (1991). Decision Framework for fast-track construction: A deterministic analysis. ConstructionManagement and Economics, 9, 467-479.

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Keywords:Uninterruptable Power Source, Photovoltaic, Grid-tied,Maximum Power Point, Tracking, Ampacity.

INTRODUCTION

The Solar Power System for a Habitat Container is aninitiative by the College of Computing, Engineering &Construction (UNF). In an effort to deviate fromconventional non-renewable methods of supplyingelectricity, a solar photovoltaic system was designed andinstalled on a potentially habitable structure, reincarnatedfrom a decommissioned shipping container. As part ofUNF’s transformational and community based learningmission, the Department of Construction Managementnow offers a course on Industrial Construction. This newcourse allows students to utilize construction techniquesand practices taught in the classroom and simultaneouslyget a hands-on application in a real environment whilerefurbishing the steel containers.

The first step in restoring the shipping container to itsoriginal state was to thoroughly assess its existingcondition. Students did research on previousconstruction projects involving these containers.Preceding the research, it was decided that the finishedproduct would have universal properties, allowing fora broad range of possible uses. The Habitat Containerdesign accommodates many uses such as a mobile officespace, disaster relief shelter; simple storage shed, or

school room. Students were responsible for delegatingtasks, maintaining proper job-site and tool safety, andmeeting all intended deadlines. Along with theseessential skills came many other considerations such asethical construction practices and customer satisfaction.

Figure 1. Shipping Container Restoration

While designing the Solar Power System for the HabitatContainer, it was decided that it would be used as acomputer lab. To the agreement of most, there wouldbe no better ending to an educational legacy then toprovide and enhance the education abroad. CentroEducativo Pananao, the educational institution of an

impoverished villagein the DominicanRepublic, was selectedas the final residenceo f t h e H a b i t a tContainer.

Figure 2. UNF Habitat Container

Design of a solar Power system

John A. Gonzalez and Maged K. Malek, Ph.D, AM.ASCE, University of North Florida

aBsTRaCT: This document describes the design of a Photo Voltaic (PV) system to be used for powering a refurbishedcontainer for habitat use. This solar power system design is primarily used for research within the University of NorthFlorida. The design requirements for this solar power system are specific to a refurbished freight container which would besuitable for human habitation. The electricity generated by the solar power system is stored in batteries which provide anuninterruptable power source for operation of lighting and use of small appliances for a full day. The design addresses suchparameters as electrical load requirements, site assessment, component sizing, safety considerations, and system cost.

Dr Malekwas conferred his Ph.D degree from the University of Central Florida-Orlando, Fl. He presently serves as Chair of the ConstructionDepartment, College of Computing Sciences, Engineering and construction at the University of North Florida (UNF). He has been teachingin academia for 15 years. His education is supplemented with a rich 15 years of working experience in the industry

John A. Gonzalez is an electrical engineering student at the University of North Florida. He has four years of experience designing and installing photovoltaic power systems and founded an alternative energy advocacy organization called The Foundation for a Renewable Energy Enterprise (FREE).

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SOLAR POWER SYSTEM, THEORY AND BACKGROUND

Photovoltaic (PV) power systems convert sunlightdirectly into electricity. Photovoltaic applications arebecoming more dynamic in their design; therefore,selecting system components and the designprocedures can be a difficult task.

The energy stored provides uninterruptable power tothe connected structure. Figure 3 shows the variouselements that make up an off-grid PV system. Theseelements are described further in the followingsubsections.

Figure 3. Solar Power System Flow Diagram[9].

Solar photovoltaic panelsThe solar panel also referred to as a “module” is themost essential part of any solar system. A PV panelconsists of many photovoltaic cells made from semi-conductor materials such as silicon. When light energy,in the form of photons, strikes the cell, a portion of thatenergy is absorbed within the semiconductor material.Photons from the solar radiation impact the cell in awide range of energies. Some photons do not haveenough energy for it to be absorbed within the cell,whereas others have excess energy and pass rightthrough. The energy absorbed within thesemiconductor material (measured in electron volts,eV) forms an electron-hole pair, freeing the electronsfrom their atomic bond and allowing them to flowfreely [3].

Efficiency“How much energy input is needed for its relativeoutput?” As determined by PV testing facilities, efficiency iscalculated by dividing the nominal maximum powerrating (P_MAX) of the PV panel, by the sun’s radiance inpower per unit area. Efficiency is expressed as apercentage.

Performance

The basic electrical output profile of a PV panel is itscurrent-voltage (I-V) characteristic, shown in Figure 4.The I-V element is based on the wiring of the cellconductors and their intended current and voltageoutput. On the graph, the voltage can be plotted againstcurrent for all operating points, and an I-V curve isformed. The I-V curve is an accurate way to calculate themaximum power that the panel produces under certainconditions. Figure 4 shows an I-V curve model. At thepoint on the graph where voltage is zero, the amperageis at maximum. This is the short-circuit current rating(ISC), representing the maximum electrical current of thedevice under no load. As the voltage increases, theamperage slowly starts to decrease before suddenlydropping off. This gradual drop in the current forms theknee of the I-V curve. The curve ends when the amperageis zero and the voltage is then at its maximum. Thismaximum voltage value is the open-circuit voltage rating(VOC), representing the voltage of the device under aninfinite load. As shown on the graph below, the pointwhere the product of the device current and voltage is atits maximum is the maximum power point [4]. Power =Voltage*Current, this point represents the maximumpower output of the PV panel when electrically loadedwith some finite resistance.

Figure 4. PV Panel Electrical Profile [4]


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The BP275 model PV panel, manufactured by BP Solar Inc.,was chosen for the Solar Power System for the HabitatContainer. This PV panel consists of 36 PV cells connected inseries, and provides 75 watts of nominal maximum power.

Figure 5. PV Panel’s Rating Nameplate.

Response

All PV cells are rated under standardized testconditions (STC) including an irradiance intensity of1000W/m^2, air mass of AM1.5 (standard referencespectrum), and 25 ± 2°C [7].

As the solar irradiation increases, the current generatedand the resulting power produced by the PV cellincreases proportionally. This relationship between theamount of solar irradiance and the output current of aPV cell can play a role in estimating the system poweroutput in periods of less than peak-sun (<1000W/m2).If the amount of solar irradiance is measured througha device such as a pyronometer, a short calculation candetermine the estimated loss of current due todecreased sunlight. To do so, the short-circuit current(ISC) of the PV panel is multiplied by the quotient of themeasured irradiance and STC irradiance[1].

Below is an example of the change in ISC of a BP275 PVpanel exposed to half peak-sun irradiance, to show thedirect correlation between current and irradiation.

A PV panel has a temperature coefficient rating, whichdepicts the rate of change in power output relative tothe changing temperature. These coefficients arespecific to the PV device manufacturer, and are usuallybased on individual field measurements of the PV cellor panel [1]. A correction factor, explained further in thesystem design section of this document, should beimplemented to estimate a PV device’s output undercertain climate conditions.

DESCRIPTION OF THE SELECTED COMPONENTSFOR THE PV SYSTEM

Solar charge controllerA solar charge controller is required in several solarpower systems that utilize batteries. Charge controllersmanage interactions and energy flows between a PVarray, battery bank, and electrical load.

Controller TypesSome various types of charge controllers on the markettoday include: pulse-width modulated (PWM) controllers,maximum power-point tracking (MPPT) controllers, sin-gle-stage controllers, shunt controllers, and diversionarycontrollers. This document only describes the first twotypes of charge controllers, as they are the most widelyused. The most commonly used type of solar charge con-troller is the series-interrupting or pulse-width-modulated(PWM) controller. Also seen in motor controls, telecom-munications, and audio amplification applications, pulse-width-modulation simulates a variable current byswitching a series element, on and off, at high frequenciesover variable time periods. The pulse width gradually de-creases as the battery voltage rises, which reduces the av-erage current into the battery [2].

Controller ProtectionThere are various types of solar charge controllers witha range of features; however, they all have a standardfunctionality. The main function of the charge controlleris to regulate the power entering the batteries from thePV panels, preventing excessive battery charging thatresult in severe gassing, loss of electrolyte, excessiveheat, and corrosion [1].

Controller Operation

Figure 6. Three Stage Charge Controller [6]


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Most charge controllers employ a three-stage process inallowing a battery to charge safely and efficiently. Thefirst stage of battery charge, known as the bulk stage, sup-plies the battery with a constant charge current with anincreasing voltage. Once the bulk voltage is reached, thebeginning of an absorption stage is underway. In thisstage, the maximum charging voltage is reached and thecharging current decreases. The battery is now preparedto stay dormant for as long as necessary. In the third stageof battery charge, the float stage, the charging voltage isreduced to a lower level to reduce gassing and prolongthe battery life. The main purpose of the float charge is tokeep the fully charged battery from discharging [5]. Fig-ure 6 shows the operating characteristics of a typicalthree-stage charge controller.

The charge controller selected for the design of the solarpower system for the Habitat Container is the FLEX-max80 by OutBack Power Systems. This device is anMPPT controller that uses active and intelligent thermalmanagement cooling, allowing up to 80 operating ampsin ambient temperatures as high as 40°C.

BatteriesBatteries are divided into two classes, primary and sec-ondary. Primary batteries cannot be recharged for re-peated usage, and therefore, are not suitable for a solarpower system. Secondary storage batteries can be fur-ther classified into three types: a starting, lighting, andignition (SLI) battery, a flooded lead-acid battery, anda captive- electrolyte battery.

Starting, Lighting and IgnitionAn SLI type of battery is actually a flooded lead-acidbattery, but is designed to have a shallow-dischargecycle. SLI type batteries are meant to discharge largeamounts of current for a short duration, such as for star-ing a vehicle. SLI type batteries use a flooded-elec-trolyte core, and although they can be used in PVapplications, they are not recommended due to theirlimited capacity to store electrical current. These batter-ies have a rating in cold-cranking amps (CCA), whichis a measurement of how much electrical current a bat-tery can deliver at 0° F for 30 seconds without droppingbelow 7.2 volts [6].

Captive Electrolyte

A more advanced deep-cycling battery technology con-sists of an immobilized electrolyte within the battery core.

These are often referred to as valve-regulated lead-acidbatteries because they are sealed and include only pres-sure-relief vents. The immobilization of the electrolytesolution is convenient because it is spill-proof and can beshipped as non-hazardous material. The pressure-reliefvents are precautionary in the case of overcharging. Thisintolerance to overcharging can be a drawback to usingthis type of battery. Once the battery sees an excessivecharge, the internal gas pressure opens the relief valvesresulting in a permanent loss of water that cannot be re-plenished. Under a controlled charge, the relief valves re-main closed and the gassing process is contained. Thecaptive electrolyte battery remains virtually maintenancefree under these conditions, making it an ideal batter forremote locations [1]. The two most commonly used cap-tive-electrolyte batteries are those that contain a gelledelectrolyte, and those containing an absorbed glass mat(AGM) electrolyte. The electrolyte in a gel cell has a sili-con dioxide additive in it, providing its viscosity. Thesebatteries have a higher unit cost than most other typesbecause of their repeated deep cycling capabilities andless susceptibility to freezing. The absorbed glass mat bat-tery, on the other hand, suspends the electrolyte solutionin a fibrous silica glass mat. This technology is not onlyless expensive to manufacture than the gel cell, but addi-tionally, the glass mat provides pockets that assist in therecombination of gasses, generated during charging, andthus limits the amount of hydrogen gas produced.

Figure 7. Solar Power System Battery Bank

Solar system design

The design process of any solar PV system begins withdetermining the system load. The next task is gatheringsite data regarding the location of the PV system. The ac-curacy of the site data is crucial for the power analysisand system design considerations. Using this data, thesize of the system components is determined. The designof a stand-alone system requires a fine balance betweenenergy supply and demand. Once a proper design layout

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or...

or...

is in place, many safety precautions must not be over-looked throughout the installation of the solar system.

Electrical load analysis

The solar power system for the Habitat Container is arelatively small and basic stand-alone PV system. Allof the essential elements found in any off-grid PV sys-tem are found in the Habitat Container. The value to bedetermined from the load estimation is the total power(kW) consumed by all of the loads in the container overa period of time (Hrs/Wk). The design for Habitat Con-tainer allows 4 lights to be on for approximately 2 hoursper day, and the four computers to be on for approxi-mately three hours per day or just over four hours perday in a five-day school week. The exhaust fan must berunning the entire time that the PV system is on; inorder to keep the electrical components at a lowenough operating temperature.

Table 1. Electrical Load Analysis.

The total value represents the total energy required ofcombined loads within the Habitat Container. Thisvalue is used to further calculate the size of other PVdevices. The total can be distributed between the com-puters and lights any way the user sees fit, as long asthe total is not exceeded. The fan load cannot be sacri-ficed due to cooling requirements.

Collecting site dataFactors affecting the power output

1. The solar radiance as well as the temperature of the PV cell play a vital role in the production of PVpower from the array. In properly sizing a solar PVsystem, the amount of sunlight that can be expectedto contact the PV cells, as well as the expected tem-peratures of the region where the system will be lo-cated needs to be established. The solar radiationdata is the first to be collected, as it is the main factorin the power generated by our PV array. When solar

radiation is described as power, it is described as thenumber of watts per square meter over a period ofone hour, also referred to as a sun-hour. The amountof sunlight to strike any region is directly correlatedto the latitude of that region. The PV panel array sitsflat on the roof of the container with zero tilt. Thisallows the container to be moved to desired sunnylocations without affecting the PV output. Pananaois located at latitude N19.37; therefore latitude -15°is the closest datum that represents a tilt angle of 0°,a yearly average of 5.4 sun-hours.

2. Temperature change at the site location: The tempera-ture data of importance are the average lows for a par-ticular location. There is sure to be unavoidable voltagelosses that come with higher temperatures. The poten-tial voltage spikes that accompany lower temperatureconditions can be damaging to a PV system. In fact,with the high cost of solar PV equipment, the safestroute to take is obtaining the lowest temperature everrecorded for that location.

Battery bank design

In a stand-alone system, the battery capacity is sized tobe able to independently supply the required loads fora certain period of time. The Habitat Container requires5720Wh of energy per day. Since the inverter has a con-version efficiency of 87%, the battery bank energy ca-pacity required is 6574.71Wh.

The system voltage is 24V. Therefore, the required amp-hours necessary to supply the battery bank for one dayis 274Ah, or…

Because battery efficiency is not 100%, more input cur-rent must be supplied to make up for the current with-drawn. A battery derating factor, between 0.85 and 0.95for most batteries, must be accounted for. The most sig-nificant factors in determining the battery losses are theambient temperature, as well as the length and gauge

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of battery cables that connect the battery bank to andfrom other devices. Since the Habitat Container batterybank remains within operating temperature and is rel-atively close to the other components, a derating factorof 0.9 is used to make up for losses. Taking into accountthe battery derating factor, the daily load demand inamp-hours becomes…

Days of autonomy

The days of autonomy equate to the number of consec-utive cloudy days the solar panel array will encounter.The Habitat Container Solar Power System was de-signed to accommodate one full day of autonomy. Oneday of autonomy keeps the daily load requirement at thecalculated 304.39Ah. Any additional days of autonomywould require an increase the daily battery capacity, re-sulting in the need for more batteries in the bank. Inthree days of autonomy, approximately 920Ah are re-quired.

Battery discharge cycle

Furthermore, because a deep cycle battery such as theAGM has a very low tolerance to over- discharging, aspecific depth of the battery discharge (DOD) is pro-grammed into the charge controller. The depth of dis-charge is critical to the degradation of the battery’s lifeover time.

The DOD chosen for the Habitat Container Solar PowerSystem is 50%, or 0.5, meaning the charge controller al-lows the battery bank to drain a maximum 50% beforedisconnecting the batteries from the load.

Dividing the daily required amp-hours of storage capac-ity by the DOD limit, gives a better representation of theactual amp-hour capacity, or ampacity, that is requiredby the system battery bank.

Battery temperature compensation

There is also a derate factor associated with the averageambient temperature of the battery system location.This factor is to be multiplied by the total ampacity, toobtain a fully corrected load estimation required by thePV power system.

The Habitat Container is placed in a climate region withsignificantly warmer temperatures, and thus using a win-ter average of 15.6°C is a conservative estimate. Varioustemperatures with corresponding derate factors are shownin Table 3, Ambient Temperature Compensation [2].

Table 3. Ambient Temperature Compensation

Battery Bank Sizing and Calculations

Now that the total corrected ampacity requirement hasbeen obtained, a battery with an amp-hour rating corre-sponding to this requirement can be selected. The 224AhAGM battery is an optimal choice for the Habitat Con-tainer Solar Power System because the ampacity require-ment of the AC load can be met by the ampacity of onlythree batteries. A battery with a rating greater than 224Ahwould be sufficient in such a design; however, it is pru-dent to account for the possibility of a battery being de-fective or requiring premature replacement. It is morecost effective to replace a mid-sized battery as the one onhand than a battery of any larger size. The amount of bat-teries needed to fulfill the ampacity requirement of theAC load equals the amount of batteries wired in parallel.The AGM battery that has been selected is a 6-volt battery,thus in order to reach the required 24 volts of the system,a total of 12 batteries are required.

or...

= ℎ ℎ

= 304.39 ℎ0.5 = 608.78 ℎ

or...

or...

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or...

or...

or...

or...

or...

or...

The battery bank configuration that was designed andimplemented in the Habitat Container Solar PowerSystem is shown in Figure 8, Battery Bank Configura-tion.

Figure 8. Battery Bank Configuration

SOLAR PANEL ARRAY SIZING AND CALCULATIONS

The required solar panel array current is calculatedfrom the load requirement, projected solar radiation ofthe solar panel array location, and the DC system volt-age. A significant consideration in the design analysisof a solar panel array is the compensation for periodsof high electrical loading and low solar radiation.

Solar radiation and temperature are required factors toestimate the output of a PV solar panel array. The PVsolar panel array output current is directly related tothe amount of solar radiation received by the panels.Thus, the array output current is determined by divid-ing the average estimated sun-hours, by the requiredampacity.

With this information, the appropriate solar panel canbe selected. However, in the case of the Habitat SolarPower System, the PV panels used were provided by

the UNF Energy Research Laboratory and are not ofoptimum size. Given the option of solar panel selection,a larger solar panel with a higher voltage output wouldhave been used.

The panels are connected in series to combine theirtotal voltages. Multiple strings of PV panels are thencombined in parallel to obtain the determined outputcurrent. As mentioned, the ambient temperature of thePV panel array should be taken into consideration, asit greatly affects the system operating voltage. A cor-rection factor is used in sizing the array such that a volt-age maximum is not exceeded. The array voltage mustremain under the voltage limit for the selected electricalconductors (600VDC), making the temperature correc-tion factor essential to the calculation. This factor is de-termined by multiplying the temperature coefficientprovided by the panel manufacturer, by the differencein the coldest recorded temperature and the standardlaboratory testing temperature (25°C), then adding afactor of one. The selected BP275 solar panel has a tem-perature coefficient of -0.5% / °C. So, the required tem-perature correction factor is…

OutBack Power Systems recommends that the arrayvoltage be well over the DC system voltage. Since eachPV panel has a V_OC of 21.4V, if the array employs twopanels per string, the voltage of the two PV panelscombine to reach an average of approximately 40V. Themanufacturer also requires an array voltage under150VDC for any array configuration that employs theirFlexMax80 charge controller; therefore, the maximumpossible number of panels to be used is determined. Todo so, the product of the temperature correction factorand the PV panel V_OC divides the maximum inputvoltage.

Now that the array voltage has been based on the num-ber of PV panels make up each string, the correctedsolar panel array current is used to determine the num-

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ber of strings needed to complete the array. The short-circuit current (I_SC) of a BP275 PV panel is 4.75A. Theshort-circuit current divides the array current require-ment previously calculated, to establish how manystrings the array will consist of.

The total amount of panels needed is now calculatedby multiplying the number of strings by the minimumnumber of solar panels in each string.

Due to limitation on the number of solar panels avail-able from the Energy Research Laboratory, six stringswere deployed for demonstration purposes. Therefore,the battery bank requires twice as long or twice theamount of sunlight to fully recharge to full ampacity.Figure 9 shows the solar panel configuration for theHabitat Solar Power System. Figure 10 shows the solarpanel array atop the Habitat Container.

Once all system components have been sized accordingto the load requirement, the charge controller may beselected. The size of the solar panel array has been de-termined, thus the charge controller must have an inputrating that is sufficient for the size of the solar panelarray. The maximum array power output of the HabitatContainer is 1.8kW, and when divided by the systemvoltage of 24V, the maximum array current is 75A. This

means than the charge controller to be used on the solarPV system for the Habitat Container must be able to op-erate above 1.95kW and 61.75A. This quick calculationconfirms that the FlexMax80 charge controller by Out-Back Power Systems is an ideal selection.

GROUNDING & PROTECTION

The grounding for this PV system begins with a specialclip installed between the frame of each solar panel andthe mounting rack. This clip bonds the two metal com-ponents, making them one continuous conductor iflightning were to strike. From the racking system, abare copper wire is run alongside the electrical conduitand is terminated on the negative bus bar of an exteriorjunction box called a combiner. The combiner is whereeach string is combined into one single parallel run thatfirst terminates at the charge controller. The bare copperwire then continues from the combiner to an 11ftground rod, planted several feet from the container.This ground rod is what provides any surge a directpath to the earth without damaging any electrical com-ponents. All wire used to connect the solar panels is10AWG copper with an extra coating of insulation toprotect the conductor from weathering. The cables usedto connect the batteries together are 4/0 AWG copper.The four cables used to connect the batteries to the cir-cuit breaker and the inverter are 2/0 AWG copper, asthey are longer and require a thicker conductor to com-pensate for any current losses in transmission. Lastly,the wires used to connect the charge controller are2AWG copper.

An 80A circuit breaker protects the combined positiveconductors of the panel array circuits, and both the pos-itive and negative conductors enter the charge con-troller. Out of the charge controller and back into thesame DC breaker box, a second 80A circuit breaker pro-tects the positive conductor leaving the charge con-troller. A larger 175A breaker is then connected to thesame conductor to protect from the large amount of dis-charge current supplied by the battery bank. From theother end of the 175A breaker, the positive conductorcontinues to the inverter. A shunt is connected in serieswith the negative conductor leaving the charge controller and the negative battery cable. A shunt actsas a resistor that protects against higher than normalvoltages, harmful to the system components. From the other end of the shunt, the negative conductor

or...

or...

Figure 10. Solar Panel Array Charge controller sizing

Figure 9. Solar Panel Array Configuration

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continues to the inverter. Theconductors leaving the in-verter are run in conduit to anAC distribution panel. The ACcircuits are all connected to theAC distribution panel, whereeach circuit will also be pro-tected by an AC circuitbreaker. Figure 11 shows theDC power distribution centerwith all DC circuit breakers.

Figure 11. DC Power Distribution Center

SYSTEM COSTS

*Cost of the solar panels is not included

CONCLUSION

The Habitat Container provides a template for aspiringconstruction students who have taken interest inrestoration, and engineering students interested in sus-tainable technologies. The solar power system for theHabitat Container provided an amazing educationalmodel for the study of sustainable solar power. The de-sign of this solar power system provided students withsignificant technical hands on experience.

One major lesson learned in the process of designingand constructing the solar system for the Habitat Con-tainer was to make sure all variables have been consid-ered, and all calculations are accurate before orderingmaterials. In a sense, it was thought early in the project,if any design characteristics changed throughout thebuild, that more material could simply be added on tothe current system. It is understood now that this con-cept is not logical, nor efficient.

The students were challenged during this project butexpressed the utmost interest and excitement. A surveywas conducted at the end of the project and 80% of thestudents labeled the project as challenging yet 99%would recommend it to their peers. Students also ex-pressed their excitement for participating in a human-itarian project and simultaneously acquire practicalexperience. The professor evaluated the project as aneffective pedagogical tool.

REFERENCES

Dunlop, Jim. (2010). Photovoltaic Systems, Second Edition. National Joint Apprenticeship and Training Committee forthe Electrical Industry.

Photovoltaics, Design and Installation Manual. 2004 SolarEnergy International.

http://www.solarnavigator.net/how_solar_cells_work.htm

http://www.daviddarling.info/encyclopedia/I/AE_I-V_curve.html

http://www.batterystuff.com/tutorial_battery.html#9

http://www.batterystuff.com/tutorial_battery.html#4

http://www.fsec.ucf.edu/En/publications/pdf/standards/FSEC-std_202-10.pdf

http://www.meteorologyclimate.com/extreme-temperature-records.htm

http://www.smartwaterandenergy.com.au/SolarElectricitySys-tems/tabid/68/Default.aspx

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Keywords:construction industry project management, informationtechnology project management, leadership, leadershipassessment.

INTRODUCTION

This research focuses on two industries, constructionand information technology (IT) . We selected these in-dustries because they are project-oriented industrieswhere project success is critical. In both industries,project success is measured as the ability to deliver proj-ect results on time, on-budget, and on-scope. Yet, thereare differences in context for the two industries. Theconstruction industry is a “line industry” in which proj-ect managers work at job sites, as compared with theinformation technology industry, which provides back-office staff support for administrative systems. Whilemany factors can influence project success, leadershipand management skill are two of the more critical fac-tors (Cheng, et. al. 2005). This research addresses twoquestions: (1) Do project managers with effective lead-ership skills influence project success? (2) Are theseskills industry-independent, for example, can managersapply similar sets of leadership skills with effectivenessacross different industries?

RELATED LITERATURE

Literature related to this research focuses on leadershipissues associated with project performance and the im-pact that project leadership has on project success. Theliterature review is divided into two sections. We out-line the findings of prior research with regard to howleadership and managerial skills affect project successand failure, primarily as measured by the extent towhich projects are delivered on time and within budgetand scope. We also focus on prior research that ad-dresses how strong project leadership contributes toproject success. The literature review addresses thisfocus in the context of both industries.

Construction Industry – Project Failure

The construction industry is a project-oriented industrythat often experiences project cost and time overruns(Al-Moumani, 2000; Kumaraswamy and Chan, 1996;Mansfield, et. al., 2001; Mezher and Tawil, 1998; Ogun-lana and Promkuntong, 1996; El-Razek, et. al., 2008;Asaf and Al-Hejji, 2006; Chan and Kumaraswamy, 1997;Kaming, et. al., 1997; Ndekugri, et. al., 2008). Seventypercent of projects examined in prior research werefound to experience time overruns varying between

investigating leadership Characteristics of Project managers

across Project-Oriented Professions

Mary Sumner, Professor and Doug Bock, ProfessorSchool of Business, Southern Illinois University Edwardsville

aBsTRaCT: This paper reports on a study of the leadership practices of project managers in two project-related industries:construction management and information technology. Project managers in these project-oriented industries work withowners and stakeholders to determine requirements and to manage activities so that projects are completed on time andwithin budget. In both industries, leadership and teamwork are factors that influence project success. In this study, leadershipself assessments and observer assessments were collected through use of the Leadership Practices Inventory from 56information technology and 53 construction project managers to determine the relationships among common leadershippractices across the two industries.

Dr. Mary Sumner is Professor of Computer Management and Information Systems, School of Business, Southern Illinois UniversityEdwardsville. She has taught for 28 years in the areas of management of information technology, project management, softwaresystems design, and enterprise systems design. Her education includes a B.A. Syracuse, M.A., University of Chicago, M.A., Columbia University, and Doctorate, Rutgers University.

Dr. Doug Bock is Professor and Chair of the Department of CMIS in the School of Business at Southern Illinois University Edwardsville. Dr. Bock's primary teaching areas include database programming for both Windows and Web based applications.His Academic Background includes: Ph.D., Indiana University, M.B.A., Indiana University, and B.S., Indiana University.

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10% and 30% of the original estimates (Asaf and Al-Hejji, 2006).

When construction projects are delayed, there are seri-ous repercussions for owners, who expect financial re-turns, and contractors, who may have to pay damagesfor delayed project completion. Owners and contrac-tors have opposing views regarding the reasons forproject delay, and may blame one another for delays(Kamaraswamy and Chan, 1998).

The most common cause of project delay identified byowners, consultants, and contractors are change orders(Assaf and Al-Mejji, 2006). Change orders include proj-ect design changes by owners (El-Razek, et. al., 2008),client-driven changes (where clients may not be own-ers) (Chan and Kumaraswamy, 1997), and user changes(Al-Momani, 2000). Leadership that includes effectivecommunications can reduce the number of client-dri-ven changes, and this may in turn lead to a reductionin project delays and influence project success.

Construction Industry – Leadership in Construction

New employees within the construction industry typi-cally move up through various technical trades, oftenwith titles designating apprentice, journeyman, andmaster levels of expertise. Project managers are oftenselected from among the superior performing mastersof the various trades. While project managers requiresome technical domain knowledge to perform well,they also require managerial skills that are not neces-sarily technically related.

Numerous researchers have examined the question,“What teamwork and relationship building skills arerelated to project success for the construction indus-try”? (Ammeter, et. al, 2002; Dainty, et. al., 2005; Leung,et. al., 2008; Wong, et. al., 2009; Ahadzie, et. al., 2008;and Fong and Lung, 2007). One study of predictors ofproject cost performance found that performance is in-fluenced by various leadership behaviors. These in-clude communicating project goals, aligning teammember goals with project goals, fostering a feeling ofempowerment among team members, and fostering agood work ethic (Ammeter, Anthony, and Dukerich,2002). Another study found that superior-performingproject managers demonstrate eleven generic leader-ship behaviors: customer service orientation, initiative,conceptual thinking, information seeking, achievement

orientation, teamwork and cooperation, team leader-ship, analytical thinking, impact and influence, flexibil-ity, and self-control (Dainty, Cheng, and Moore, 2005).

Another key to project success is achieving commit-ment to project goals among clients, professionals (suchas architects and engineers), and contractors. Achiev-ing commitment through the use of project manager“soft skills” emerged as important for project managersof mass house building projects. These “soft skills” in-clude effective time management practices, ability toprovide effective solutions to conflicts, ability to main-tain good relationships, and ease in helping to solvepersonal problems (Ahadzie, Proverbs, and Olomo-laiye, 2008).

New delivery methods for construction projects, suchas Integrated Project Delivery (IPD), are predicated onproject manager characteristics such as the ability togenerate trust, mutual respect, and teamwork in theachievement of common goals. Team leadership skillsand trust among participants in IPD teams contributeto construction project success (Fong and Lung, 2007).

IT Industry – Project Failure

Like the construction industry, the information technol-ogy industry experiences significant project time andcost overruns (Barki, 1993; Keil, et. al, 1998; Ewusi-Men-sah, 1997). The Standish Group reports that two out ofthree IT projects are considered to be failures, sufferingfrom cost overruns, time overruns, or a project rolloutthat includes fewer features or functions than promised(Nelson, 2007). Further, about 20 percent of IT projectsare cancelled with the cancellation percentage tendingto double for larger projects (those exceeding sixmonths) (Jones, 2000). Additionally, research hasshown that the failure rate does not seem to be decreas-ing despite many years of managerial focus on factorsaffecting project success (Nelson, 2007).

McConnell (1996) classifies classic mistakes into fourcategories: process, people, product, and technology.Process mistakes deal with insufficient estimating, in-sufficient risk management, time-spent in the ap-proval/budgeting process, contractor failure, and otherpoor management processes associated with projectmanagement. People mistakes pertain to poor motiva-tion, ineffective team relationships, dealing with poorperformers, and adding people to a late project. Prod-uct issues are scope creep, unnecessary requirements,

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and developer gold plating (e.g. adding new high-techfeatures that are not required). Finally, technology mis-takes include expecting new technologies to solveproblems and overestimating the potential impact ofnew tools and methods (Nelson, 2007).

Some of the most prevalent project mistakes can be mit-igated through effective leadership. These are processmistakes (e.g. poor estimation and/or scheduling, in-sufficient risk management, insufficient planning,shortchanged quality assurance, and poor require-ments determination) and people mistakes (e.g. inef-fective stakeholder management, weak personnelissues, and insufficient project sponsorship).

IT Industry – Leadership in IT Projects

As with construction, leadership characteristics of projectmanagers have an important impact on the success of ITprojects. In the IT field, most salaried employees begintheir career in technical positions. The first of several pro-motions generally follows a technical track; however, atsome point it is common for individuals to be promotedinto project management positions. Often this promotionresults from demonstrated technical expertise rather thanleadership ability (Rosenbaum, 1991). This pattern ofpromotion to project manager is very similar to that ofthe construction industry where technically competentindividuals may lack the interpersonal skills needed tomanage and to motivate others.

Past research has addressed the question, “What lead-ership and soft skills do IT project managers need?”The findings show that the best technical leaders con-centrate on defining the problem, resolving differences,welcoming constructive criticisms, and being open-minded (Weinberg, 1986). However, interpersonal andmanagement skills are important because project man-agers need to interact with stakeholders (Lee, Trauth,and Farwell, 1995).

Successful IT project managers are able to manage peo-ple, stress, and communications (Bloom, 1996; Geaney,1995). Necessary soft skills include organizationalknowledge, an understanding of how to handle peoplewithin the organizational structure, leadership skills,and client-handling skills (Kirsch, 2000). Additionally,the importance of task and team coordination as essen-tial for successful team performance has been reported(Espinosa, Slaughter, Kraut, and Herbsleb, 2007).

Soft skills are also important in new types of projects,including outsourcing projects. Using a critical inci-dent methodology to assess the soft skills of 209 projectmanagers, Langer, et. al. (2008) reported that both hardand soft skills had a positive impact on project per-formance, including cost performance and client satis-faction. While effective project managers needtechnical skills, domain expertise, and soft skills, in-cluding sensitivity to organizational culture and clientrelationships, it has been reported that soft skills aremore important for project success than hard skills.Soft skills are important to working effectively withstakeholders and clients, and in facilitating client satis-faction (Langer, et.al., 2008).

Leadership research regarding IT professionals hasgiven little attention to proposing a leadership profilethat takes into account the unique problems associatedwith managing technical professionals. In a 10-year-old study of the key characteristics of technical projectleaders, Thite (1999) tested the applicability of thetransformational leadership model developed by Bassand Avolio (Bass, et. al., 1997) in a technical project en-vironment. The research found that managers of moresuccessful IT projects exhibit transformational andtechnical leadership behaviors to a greater extent thanmanagers of less successful projects. Another study ofthe key leadership characteristics of IT project man-agers found leadership assessments of observers to bepredictive of project success as measured by on-timeproject completion (Sumner, et. al., 2006).

In summary, our analysis of prior research reveals thatboth the construction and IT industries exhibit a set ofcommon risk factors that influence project success, andmany of these risk factors can be mitigated by man-agers who have good leadership and people skills. Theimportance of generic leadership competencies forproject managers in influencing project success rein-forces the underlying rationale for this research.

RESEARCH METHODOLOGY

Research Questions

Many categories of factors affect project success; how-ever, it is not feasible to examine all of the factors in asingle study. This research focuses on those leadershipand management factors that can contribute to projectsuccess. Specifically, this research is interested in the

Leadership Practice Items Measuring the Practice

Model the Way • I set a personal example of what I expect of others.• I spend time an energy making certain that the people I work with adhere to the principles and standards we have agreed on.

• I follow through on promises and commitments that I make.• I ask for feedback on how my actions affect other people’s performance.• I build consensus around a common set of values for running our organization.

• I am clear about my philosophy of leadership.

Inspire a Shared Vision • I talk about future trends that will influence how our work gets done.

• I describe a compelling image of what our future could be like.• I appeal to others to share an exciting dream of the future.• I show others how their long-term interests can be realized by enlisting in a common vision.

• I paint the “big picture” of what we aspire to accomplish.• I speak with genuine conviction about the higher meaning and purpose of our work.

Challenge the Process • I seek out challenging opportunities that test my own skills and abilities.

• I challenge people to try out new and innovative ways to do their work.

• I search outside the formal boundaries of my organization for innovative ways to improve what we do.

• I ask “What can we learn” when things don’t go as expected.• I make certain that we set achievable goals, make concrete plans, and establish measurable milestones for the projects and programs that we work on.

• I experiment and take risks, even when there is a chance of failure.

Enable Others to Act • I develop cooperative relationships among people I work with.• I actively listen to diverse points of view.• I treat others with dignity and respect.• I support the decisions that people make on their own.• I give people a great deal of freedom and choice in deciding how to do their work.

• I ensure that people grow in their jobs by learning new skills and developing themselves.

Encourage the Heart • I praise people for a job well done.• I make it a point to let people know about my confidence in their abilities.

• I make sure that people are creatively rewarded for their contributions to the success of our projects.

• I publicly recognize people who exemplify commitment to shared values.

• I find ways to celebrate accomplishments.• I give members of the team lots of appreciation and support.

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common leadership skills of project managers acrossdiverse industries. For this reason, the constructionand IT industries were selected because, on face, thetwo industries appear to be quite different.

Project managers within the construction industrywork at job sites while IT industry managers manageprojects that tend to provide administrative support tothe organization. The construction industry is gener-ally associated with professional trades while the IT in-dustry is generally associated with white collarcomputer system professionals. It is interesting to con-sider the common leadership skills of project managersin these two apparently diverse industries, as both ofthese industries are project-based. As shown by the re-view of literature, in both industries, the success of aproject depends to a great extent on the ability of theproject manager to use a set of fairly generic leadershipand management skills to supervise and motivate proj-ect team members.

The research questions focus on identifying whetherthere are differences between successful project man-ager skill sets for these two different domains with agoal of identifying generalizable leadership practicesin project management. This leads to two similar, yetdifferent questions: (1) Are there similarities betweenproject manager leadership self assessments acrossthese two industries? and (2) Are there similarities be-tween observer assessments of project managers acrossthese two industries?

Data Collection Instrument

The research methodology has been used in prior re-search—the examination of successful leadership prac-tices through the use of combined self and observerassessments of project managers (Kouzes and Posner,2002). The Leadership Practices Inventory (LPI) is an as-sessment instrument with components that enable bothself and observer assessment. A self assessment is com-pleted by an individual leader (project manager) while anobserver assessment is completed by either a peer, supe-rior, or subordinate of the leader (project manager). TheKouzes and Posner's text, The Leadership Challenge(2002) gives a detailed discussion of the theoretical basisfor the LPI. This section provides a brief discussion of theLPI for those unfamiliar with its construction.

LPI assessments yield a leadership profile that providesleadership feedback based on how well leaders per-form. The assessment is based on five leadership prac-

tices that the LPI measures. Kouzes and Posner termthese the Five Practices of Exemplary Leadership.Table 1 summarizes the LPI instrument’s six behaviorstatements that are associated with each of the fiveleadership practices. This yields a total of 30 behaviorstatements. In using the instrument, respondents (theindividual leader and observer for that leader) rate thefrequency of use of different practice behaviors on a 10-point Likert scale (1 to 10). The scale has descriptivescale anchors of "almost never" and "almost always,"respectively. The six statement response scores withineach of the five leadership practices are summed so thateach of the five leadership practice scores has a possiblerange of six to 60 points.

Table 1. Leadership Practices

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In terms of validity, the LPI exhibits concurrent, face, andpredictive validity (Posner and Kouzes, 2002).Concurrent validity is exhibited because higher LPIscores correlate with positive outcomes such asleadership credibility. Face validity is exhibited becausethe results of an LPI assessment are easily understood.Predictive validity is exhibited because the LPI appearsto be a good predictor of leadership performance. Theinternal reliability of the instrument is strong with allscales above the 0.75 level (Cronbach's Alpha) (Kouzesand Posner, 2003).

This instrument was selected because several otherresearch studies have successfully used the LPI tocharacterize leadership among diverse groups.Shoemaker used the LPI to study the leadership practicesof sales managers from the vantage point of theirsalespeople (Shoemaker, 2003). Sales managers werefound to be consistent in terms of two of the leadershipbest practices: (1) Inspire a Shared Vision and (2) Modelthe Way. A cross-cultural study of leadership practicesused the LPI to examine leadership practices in differentinternational regions (the United States, Slovenia, andNigeria), and found no statistically significant differencesbetween the leadership best practices of American,Slovenian, and Nigerian MBA students (Zagorsek, Jaklic,and Stough, 2004). This suggests that leadership practicesare generalizable in nature and may be universallypracticed; however, we found no research thatcharacterized the best leadership practices of projectmanagers across project-oriented industries. Thus, thisresearch adds to the body of knowledge for projectmanager leadership practices in general.

Hypotheses

The research focuses primarily on determining whethercertain leadership practices are common across project-oriented industries. Given this focus and the use of theLPI as an assessment instrument, our hypotheses statedin the null form are:

H01: The leadership practices measured by a self assessment will not be significantly different between project managers in the construction and IT industries.

H02: The leadership practices measured by an observer assessment will not be significantly different between project managers in the construction and IT industries.

Data Collection Procedures

Construction Subset: Subject construction projectmanagers were selected from a group of participants in aConstruction Leadership Institute, a leadershipdevelopment program for experienced project managers.Each of the participants completed a LPI self assessmentand a background questionnaire while attending theInstitute. The background questionnaire collected dataon gender, age, educational background, certification, jobcategory, and time in the construction field. Eachparticipant was directed to ask another individual tocomplete an LPI observer assessment on an anonymousbasis. The participants were provided an LPI observerassessment instrument to give to an observer. Eachparticipant’s respective observer returned theirassessment in a separate return envelope to the researchteam. In total, 53 construction managers completed theassessments.

IT Subse: Data were collected by surveying IT projectmanagers who are members of the Project ManagementInstitute chapters in St. Louis, Indianapolis, Bloomington(IL), and Kansas City. The cities are deemed sufficientlydiverse to provide representative IT project teams for theUnited States. The total population of membership forthese chapters included 1,024 project managers. Of these,a total of 112 project managers agreed to participate in thestudy. They each received: (1) a LPI self assessment, (2)LPI observer assessment, and (3) backgroundquestionnaire forms. Similar to the constructionmanagers, the background questionnaire collected dataon gender, age, educational background, certification, jobcategory, and time in the IT field.

The project managers were directed to complete a selfassessment and background questionnaire and to returnthem in an envelope supplied by the investigators.Similar to the construction managers, they were directedto ask another individual to participate in the observerassessment on an anonymous basis. The individualcompleting the observer assessment returned theassessment instrument form in a separate returnenvelope. Of these 112 volunteers, 66 project managerscontributed to the study, and 56 of these completed theleadership self assessment and backgroundquestionnaire. Forty-five (45) of the responses werecomplete, including the self assessment, observerassessment, and background questionnaire. This is an

35


adequate response rate, given the comprehensiveassessment process and the sensitivity of these data. Theanalysis was completed by use of an independentsamples t-test where equal variances are not assumed.The procedure adjusts for the different sample sizes of thetwo groups.

Respondent Characteristics

Table 2 summarizes the characteristics of participants inthe research. For construction management professionals,50 respondents are male (94%) and 3 are female (6%). Atotal of 12 (23%) have a graduate degree while anadditional 27 (51%) have a bachelor degree. Reported jobtitles include project manager (27), senior manager (10),owner (5), director (3), and eight other job titles.Respondents have an average of 13.14 years in theconstruction field.

For IT professionals, a total of 42 respondents are male(75%) and 14 are female (25%). In terms of educationalbackground, 29 (51%) have a graduate degree while anadditional 15 (26%) have a bachelor degree. Thirty-sixrespondents (63%) hold the Project ManagementProfessional (PMP) Certification that is administered bythe Project Management Institute. Reported job titlesinclude project manager (36), manager (5), consultant (2),PMO manager (2), and 11 other job titles. Respondentshave an average of 14.58 years in the IT field.

Table 2. Respondent Characteristics

In terms of comparability, one noteworthy statistic isthe comparable years of experience within therespondents respective fields (construction = 13.14 andIT = 14.58) and the number of respondents with collegedegrees (construction = 74% and IT = 70%).

Data Analysis

The data were analyzed using the independent samplest-test (equal variances not assumed) to determine if thefive leadership practices mean scores for constructionand IT project managers were statistically different.The experiment-wise level of significance was set at the

a = .05 level.

Table 3 gives the differences in the means, standarddeviations, standard error of the mean, t-statistic,degrees of freedom, and significance (2-tailed) for allfive self assessment variables. The mean value wassignificantly different between construction and ITproject managers for each of the five leadershipassessment scales of the LPI.

Table 3: Independent Samples Test: Self –Assessment

Table 4 gives these same statistics for the observerassessments. Here the number of IT project managersreported is 45 because only 45 observer assessmentswere returned. The mean value was significantlydifferent between construction and IT project managersfor three of the variables: Obs. Model (Observer scorefor Model the Way), Obs. Challenge (Observer score forChallenge the Process), and Obs. Encourage (Observerscore for Encourage the Heart). In terms of the abilityof managers to inspire a shared vision in others (Obs.Inspire – Observer score for Inspire a Shared Vision),the observers did not perceive there to be a significantdifference in this best practice of project managers.Observers also did not perceive a significant differencein how project managers in the two different fieldsenable others to act (Obs. Enable – Observer score forEnable Others to Act). It appears that project managersacross these two diverse fields exhibit similar skillswith respect to the factors of the LPI that comprise thesetwo best practices.

The Effect of Private Outside Space Quality on the Property Value of a Single Family Dwelling

Characteristic Construction Management N=53

Information Technology N=56

Gender 50 male (95%); 3 female (6%)

42 male (75%); 14 female (25%).

Educational Background

Graduate Degree = 12 (23%); Undergrad Degree = 27 (51%); Total with degrees = 39 (74%).

Graduate Degree = 29 (51%); Undergrad Degree = 15 (26%); Total with degrees = 44 (79%).

Industry Certification

Project Management Professional Certification = 36 (63%).

Job Title Project Manager (27); Senior Manager (10); Owner (5); Director (3); Other (8).

Project Manager (36); Manager (5); Consultant (2); PMO Manager (2); Other (11).

Years in Field 13.14 years.

14.58 years.

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Table 4: Independent Samples Test: Observer Assessment

Table 5 gives average assessments (self assessment andobserver assessment) for the five leadership LPI scales.Again, the data for IT project managers is based upon 45cases, since 45 of the IT project managers receivedobserver assessments. When averaged, all of the scalesshow significant differences in the means between theconstruction and IT groups, with a weak statisticallysignificant effect for the Enable Others to Act scale. Thisis consistent with the earlier findings that projectmanagers across these two industries seem to exhibitsimilar skills when performing project managementresponsibilities related to how they develop cooperativerelationships among workers, listen to the points of viewof others, and treat others with dignity and respect whilegiving them freedom to decide how to go about their jobs.

Table 5: Independent Samples Test: Average Assessments

DISCUSSION

The analysis yields some interesting results. The literaturereporting on the use of the LPI provides benchmarkresults from prior samples (Leadership PracticesInventory Psychometric Properties, 2000). Table 6compares the scores of the self and observer assessmentsfor the construction and IT construction subjects of this

study with the benchmark scores reported from almost18,000 respondents in prior research.

Table 6: Comparison of Self assessment Data with Benchmark Data

The possible score for each leadership practice falls withina range of six (minimum) to 60 (maximum) points. Ourresult for each leadership practice is consistent with thebenchmarking mean scores. Benchmark literature reportsthat leaders tend to see themselves as slightly less active inthe five different leadership practices than do theirobservers. Our results are strikingly consistent with this.Likewise, the extent to which leaders engage in thesedifferent leadership practices is consistent with thebenchmarks for both construction and IT managers.

The second interesting result is that there are statisticallysignificant differences between the construction and ITmanagers for the five leadership practice self assessmentscores. In each of the self assessment leadership practicescores, construction project managers rated themselvessignificantly lower than their IT project managercounterparts. The LPI assessment scores for constructionproject managers is also lower than the benchmark resultsthat are based upon multiple industries. This begs thequestion: Why do construction project managers claim toengage in these practices to a significantly lesser extentthan managers in other industries? A possible explanationis that construction managers may not view themselves ashaving the "soft skills" that the LPI instrument measures.This is an area for further research although it is clear thatthe LPI is adequate for the assessment of leaders withinthe construction management field.

The observer assessment data yields a third interestingresult. Observer assessment scores for both constructionand IT project managers are closer to the observerassessment benchmark scores than are the self assessmentscores. For each LPI measure observers of the projectmanagers view the managers as engaging in leadership

Construction Management (N=53)

Information Technology (N=45)

T-Test for Equality of Means (Equal variances not assumed)

Variable Mean (Std. Dev.)

Std. Error Mean

Mean (Std. Dev.)

Std. Error Mean

t df Sig. (2-tailed)

Avg. Model

44.75 (5.814)

0.797 48.83 (8.133)

1.186 -2.851 82.204 .006

Avg. Inspire

39.47 (8.853)

1.216 44.78 (9.539)

1.422 -2.836 90.799 .006

Avg. Challenge

41.59 (7.248)

0.996 47.71 (7.080)

1.055 -4.221 94.102 .000

Avg. Enable

47.90 (7.011)

0.963 50.98 (7.089)

1.057 -2.151 93.100 .034

Avg. Encourage

42.15 (7.981)

1.096 48.58 (7.694)

1.147 -4.052 94.428 .000

Construction PM’s IT Project Managers Benchmark Results Self Observer Self Observer Self Observer Model the Way 43.20

45.53 47.88 49.64 47.0 47.5

Inspire a Shared Vision

37.22 40.99 42.46 44.38 40.6 42.0

Challenge the Process

39.95 42.73 46.39 47.73 43.9 44.4

Enable others to Act

47.21 47.43 50.13 50.31 48.7 47.8

Encourage the Heart

40.75 41.56 48.07 48.98 43.8 44.9

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activities to a greater extent than project managers viewthemselves with regard to the same activities. Again, thisis an area that warrants additional research although webelieve that given the sufficient size of our groups ofrespondents, it is unlikely that large sample sizes will yieldsignificantly different leadership practice scores.

A fourth interesting finding concerns the potential effectof experience. Because the project managers of bothgroups were comparable in terms of experience(construction = 13.14; IT = 14.58 years), it appears that onecan rule out any potential bias that might result simplyfrom differences in experience as project managers.

One factor affecting the self assessment of project managerperformance may be due to differences in industrycultures. The IT project environment is a backofficeenvironment, whereas the construction industryenvironment is largely field-based and more diverse interms of interfacing with trade professionals (e.g.,electricians, carpenters). In the construction environment,the perceived importance of “soft skills” may bediminished, as reflected in their self assessment. Aqualitative research study, using detailed interviews,would shed light on this self assessment.

However, the observers tell a different story. The observerassessments clearly characterize both the constructionindustry and IT project managers as demonstrating keyleadership skills based upon leadership best practices.What this seems to indicate is that project management inboth industries requires leadership, and leadershipencompasses the use of “soft skills” that are generalizableand applicable across different project managementenvironments.

CONCLUSIONS

Both construction and information technology are project-driven industries. Two important conclusions can bedrawn from the study of leadership practices ofconstruction project managers and information technologyproject managers. First, from the vantage point ofobservers of these projects, leadership characteristics areimportant attributes of successful project managers in bothindustries. Second, to the extent that project leadership isindustry-independent, project managers in both industries

can benefit from leadership development programs thatfocus on “soft skills,” including inspiring others,challenging people, treating people with dignity andrespect, and encouraging people to do their best.Leadership and project success go hand in hand.

These findings have implications for project managertraining. As was pointed out earlier, project managers inboth of these industries tend to be promoted from amongsuperior performing technical workers. Additionally, it isprobably unreasonable to expect these individuals topossess the general leadership and managerial skillsassociated with successful project managers. Thus, firmsshould consider the adoption of formal training programsfor new project managers as well as refresher training forexperienced project managers. These training programsshould include classes that teach project managers how toacquire and maintain the soft skills that are requisite forsuccess.

OPPORTUNITIES FOR FURTHER RESEARCH

Given the leadership challenge, further research maystudy the impact of leadership development programs indeveloping leadership skills and their impact upon projectsuccess. In other words, are project managers whoparticipate in a leadership development program moreeffective in achieving project success than projectmanagers who do not participate in such a leadershipprogram? Is this true across industries? Or, is projectexperience a greater predictor of project success thanparticipation in a leadership development program? Whatare other attributes of successful project managers (e.g. age,educational background, type of experience, line- vs. staff-experience, military experience, etc.)? Since leadershipinfluences project success, it is important to recognize andappreciate the characteristics of effective leaders and toselect project personnel who demonstrate thesecharacteristics.

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lEED & Green Globes: a Project Owner Based analysisDaniel R. Warren and Shima N. Clarke, PhD.

Clemson University

Keywords:LEED, Green Globes, project owners, best-fit system, green certification market

INTRODUCTION

The green building certification market continues togrow in the United States, but market competitionremains limited with several barriers to entry. Evenduring difficult economic times the green market hasshown strong growth (Hampton, 2006). Therelationship between certification providers in the U.S.and their clients (project owners) remains poorlydefined. The purpose of the research was to betterunderstand the market surrounding U.S. greenbuilding certifications; green certification providers, theproject owners who participate in this market, and theinfluences on project owners’ certification selection.

BACKGROUND

Worldwide, the sustainable certification market issaturated with “ecolabels.” An ecolabel is a term usedto describe any certification brand identifying a specificgood or service is less detrimental to the environmentthan an alternative non certified good or service. TheWorld Resource Institute (2010) recorded over 370ecolabels in over 42 countries (Rodgers, Bowden,Malthouse, & ORourke). In the U.S. green constructionmarket, there are two primary competitors. They areUnited States Green Building Council (USGBC) and theGreen Building Initiative (GBI). These two non-profitsprovide the majority of green building certifications inthe U.S. Both USGBC and GBI provide a similarproduct (an ANSI accredited, 3rd party certificationsystem for sustainable construction projects) throughdiffering means (D’Antonio, 2006).

In 1993, USGBC was founded with its LEED systemand pioneering the U.S. green certification market. Thecompetitive U.S. market for green buildingcertifications really matured in 2004. It was then that

aBsTRaCT: The green construction market has demonstrated substantial growth within the past decade. In the UnitedStates, there are multiple certifications for green buildings. The top two nationally recognized systems are Leadership inEnergy and Environmental Design (LEED) and Green Globes. The vast market share goes to the LEED provider, UnitedStates Green Building Council (USGBC). These systems report certified projects in every geographic region and industry.Many project owners elect to earn either a Green Globes or LEED certification for any of an assortment of reasons. Theprocess leading to an owner’s selection is unclear. Additionally, it’s not defined which system best fulfills consumerdemands. A literature search revealed that no publications existed on this topic. Therefore, survey based research wasconducted to define: 1) What project owners compose the green certification market? 2) What influences impact projectowner certification selection? 3) If project owners are purchasing the best certification system for their demands. Theresults showed: the “best-fit” system for project owners currently utilizing the LEED system is Green Globes; mostproject owners are unaware of market alternatives to LEED; and architects, and contractors are the most influentialprofessionals during certification selection.

Dan Warren is a master's candidate in the Construction Science and Management program at Clemson University where he expectsto graduate in May 2012. He earned his Bachelor’s in Architecture in 2009. Currently, he is the acting president for his school'sUSGBC student organization.

Dr. Shima Clarke received her PhD in Civil Engineering from University of Tennessee. She is an associate professor in the ConstructionScience and Management department at Clemson University, a registered professional engineer, and a Constructor member of AIC.

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GBI acquired distribution rights in the United States(under the name Green Globes) to the UK’s BuildingResearch Establishment’s Environmental AssessmentMethod (BREEAM) protocol which was brought toCanada in 1996. Currently, the largest market sharegoes to USGBC (2010) and their LEED system. In 2009,USGBC reported over 14,000 U.S. projects and totalrevenue of $84.9 million. USGBC dwarfs GBI’s 170certified U.S. projects and $1.5 million total revenue.This lopsided market has been maturing ascompetitors: enter the market; define their self-image;and develop their respective market shares.

GBI’s Green Globes is commonly differentiated fromthe LEED system by its user-friendly online servicesthat make building certification easier and costcompetitive to LEED (GBI, 2010). The differencesbetween the LEED and Green Globes systems wereexhaustively examined in a University of Minnesotastudy. Commonly, Green Globes is seen as a costeffective alternative to LEED. The fixed certificationcost for LEED can run up to $20,000 plus a registrationfee up to $600. Green Globes fixed certification cost is$500, with estimated certification costs up to $6,000(Smith, Fischlein, Suh &Huelman, 2006). Electing eithercertification system can elevate some project costs,especially those related to materials anddocumentation. Many advocates of the sustainablebuilding practices maintain that higher upfront costsrelated to certification are offset by long term savingsduring building operation.

Beyond the descriptive term “project owner” or “client”- it is unclear exactly who the green certification marketconsumers are. Also, it is unclear how experiencedthese project owners are with the construction industryand what elements influence their selection. There areseveral elements in that may potentially influence aproject owner’s final certification selection. Theresearch team identified eight common criteria that canimpact an owner’s decision. These elements were:advertising; the architect; the contractor; anindependent consultant; in-house research; legalrequirements; a provider representative; and systemobjectivity.

Finally, which certification systems best fulfillsconsumer demand remains unknown. There is nopublic research comparing certification providers byproject owners, experience, client demand, or customersatisfaction. Data related to these components canprovide insight on: the green building certification

market; project owners; the influence and roles ofvarious construction professionals; and the future of theU.S. green certification market.

METHODOLOGY

A survey of U.S. project owners with certified greenprojects was conducted. The purpose was to gatherdata on owner motives, attitudes, satisfaction andexperience in order to draw reasonable inferences onthe green certification market. After a literature reviewwas conducted a questionnaire was composed andpilot tested. The responses from the pilot test were usedto compose a survey for distribution. Surveys weredistributed and collected with an online surveydistribution service (www.surveymonkey.com). Thesurveys were sent to 207 randomly selected projectowners from both GBI and USGBC project lists. Resultswere gathered for analysis and hypothesis testing. Oneand two sample t-tests and chi square tests were usedduring hypothesis testing.

The survey instrument utilized a series of indicatorquestions developed from the University ofMinnesota’s harmonization and comparison of theLEED and Green Globes systems. Each system utilizesdifferent point allocations for several criteria. Thecriteria with the largest point differential were selectedas “best-fit” indictors. Participant responses indicatedtheir “best-fit” system. The differing weights assignedto each element by provider allowed responses onbipolar likert scales to be used as indicators of a best-fit system.

RESULTS

Total survey response rate was 16%. Respondentsconsisted of a majority of LEED project owners. Thismay be due to LEED’s prevalence in the buildingcertification market. The major findings along withsome brief discussions from the survey are discussedbelow. Copies of the survey with complete responsesare available from the research team. For all datapresented in this section, any further discussions(beyond basic analysis) with reasonable conclusionscan be found in the discussion section.

Owner background informationProject owners were asked to identify all thecertification systems they could. USGBC’s LEED had


42


the greatest market recognition. 88% of project ownersidentified LEED, with 34% identifying Green Globesand 9% identifying other systems. Other responsesincluded Earthcraft, Green Guide for Healthcare, andEnergy Star. Further, two thirds (67%) of project ownersonly identified LEED and 13% of project owners onlyidentified Green Globes. Results are summarized inFigure 1.

Figure 1: Green System Identification

Participants were asked, on how many LEED andGreen Globes projects they had acted as either anowner or owner representative. The average projectowner has worked on 5 LEED projects and .31 GreenGlobes projects. Many (42%) respondents have a totalexperience of 1 certified project. Question five askedparticipants to provide a percentage breakdown of theircertified projects. 86% of owners have a majority oftheir projects certified under the LEED system. Thesurvey group was divided based upon these responses.The two groups were owners with at least 50% eitherLEED or Green Globes projects.

Project owners were asked how many certificationsystems were considered during their certificationselection. The respondents’ results are summarized inFigure 2. 66% of project owners considered just onesystem during their selection process. This indicatesthat: 1) project ownersstart their selectionp r o c e s s w i t h apreselected system or 2)project owners may nothave a sophisticatedunderstanding of thegreen certif icationmarket and al l i tscompetitors.

Figure 2: % of ProjectOwners by the No. ofSystems Considered During Certification Selection

Participants were asked how many years of experiencethey had related to the construction industry. Ownershad an average of 19 years of experience - indicatingmost project owners have significant experience withthe construction industry. The median number of years’experience was 17. The median was used to dividerespondents into two groups for experience-basedtesting. The significant differences that exist betweenproject owners based upon experience are addressed inthe owner selection influences and discussion sections.

Owner selection influences

Owners were asked to rank how influential severaldifferent professionals and elements were duringcertification selection. A summary of responses isshown in Figure 3. The most influential elementsduring certification selection are the architect, in-houseresearch, and the contractor. The two least influentialelements were advertising and providerrepresentatives. Interestingly, this indicated that two ofthree primary information sources from providers arethe least influential during owners’ selection.

Figure 3: Project Owner Certification Selection Influences

The results from question nineteen were further brokendown based upon participant experience for hypothesistesting. A two-sample t-test of unequal variancesreturned that there were significant differences basedon experience. Table 1 compares the responses betweenthe less and more experienced project owners. Theresponses show that, as project owners gain experience,selection influences shift from third party(architect/contractor) to secondary (in-house research)sources. Additionally, as owners gain experience,advertising and provider representatives lose influence.


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Table 1

Owner DemandThe responses presented in this section were used toidentify a best-fit system for project owners. Ownerswere asked to rank their agreement with multiplestatements declaring a particular certification criteriawas important. Agreement with each statementindicates a best-fit system. A summary of LEED ownerresponses with the best-fit system are shown in Figure4. Overall, project owners indicated that Green Globeswas the best fit system for their consumer demands andfulfilling legal requirements (local/federal) was theleast important element during certification selection.

Figure 4: LEED Project Owner Best-fit System

The responses from LEED project owners were testedfor significance using a one sample t-test. The testing ofLEED project owner responses returned statisticalsignificance. LEED owners in general showed thatGreen Globes better fulfilled their demands on 6 of 9tested criteria. Additionally, all project ownersindicated that the Green Globes system was their best-fit system. Green Globes has shown to be a bettersystem for fulfilling consumer demands than LEED.

Customer Satisfaction

The information presented in this section indicates howsatisfied project owners were with their certificationsystem. Participant responses are summarized in

Figure 5. All project owners conveyed an overallsatisfaction with all certification elements. Nosignificant differences in customer satisfaction existedbetween LEED and Green Globes project owners. Of allelements measured, certification cost and return oninvestment were the least satisfactory elements.

Figure 5: Survey Response

CONCLUSIONS

Project owners and the green building certification market

LEED is the major market share holder in the U.S. greenbuilding certification arena. 86% of owners had projectsmainly certified under the LEED system. 63% of allowners only identified LEED. All respondents whoidentified any “other” systems were able to identifyboth LEED and Green Globes. This may mean thatmarket competition is dispersed and concentrated.Most (84%) project owners recognize the LEED system.

Certification cost is not as important duringcertification selection as originally thought. Projectowners indicated that they are generally satisfied withthe cost of certification. Consumer trends in systemidentification and certification selection have showedUSGBC has maintained a majority of market sharedespite: 1) GBI providing an equivalent yet moreaffordable system and 2) Green Globes was overall thebest-fit system for LEED project owners.

Most project owners maintain an unsophisticatedunderstanding of the green certifications available. 66%of project owners only considered one system duringcertification selection and 63% of project owners couldonly identify the LEED system. Indicating the majorityof project owners preselect the LEED system beforethey start a formal selection process and owners areunlikely to change systems after their first certified project.Certification providers are generally not seen as


3.71

3.71

3.86

3.87

3.89

3.98

1 2 3 4 5

Water

Ease of Certification

Overall Building Performance

Return on Investment

Certification Cost

|Extremely Dissatisfied<--->Very Dissatisfied<----------------->Neutral<---------------->Very Satisfied<---->Extremely Satisfied|

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influential sources of information during certificationselection. Two of the three primary sources ofinformation (advertising and representatives) fromproviders were the least influential sources ofinformation for project owners. If you consider: 1) 66%of project owners consider only one system duringcertification selection and 2) in-house research is thesingle most important element during selection forexperienced owners, then you can argue that evenexperienced owners are not considering all theiroptions during certification selection.

The Architect and Contractor

The most influential professionals during certificationselection are the architect and contractor. Moreover, thecontractor and the architect have the greatest influenceon the future of the certification market. All projectowners (regardless of experience) indicated thearchitect and contractor as influential duringcertification selection. Competitors in the greencertification market would be remiss if they didn’tfocus on architects and contractors in attempt to swayowner certification selection. Additionally, lessexperienced project owners returned that architects andcontractors were the most influential sources ofinformation during certification selection. As more newproject owners choose to go green more value may beplaced on the opinions of construction professionals.

Contractors and architects are recommended to learnabout the different certification systems available.Owners (especially, less experienced owners) haveshown that architects and contractors are importantduring certification selection. A reasonable conclusionis that as the certification market continues to matureand future competitors enter the market, the potentialto save project owners thousands of dollars increases.Also, by helping their clients make an informeddecision, construction professionals can significantlyimprove their quality of service.

The future of green certifications

The future of any market is anything but solidified.USGBC has earned and maintained its massive marketshare during the initiation and growth periods of itsmarket. Now, as the market matures, competitors viefor the millions of dollars at stake. The largest ideasdiscussed that providers should consider are: 1) The

LEED project owners would have their demands bettermet if they had earned the Green Globes system 2)Green Globes is more affordable for many projectowners than LEED and 3) constructors and architectsare the most influential people in the certificationmarket.

These reasons may cause future market sharereallocation. GBI is providing a more affordable,equivalent product to USGBC that better fits consumerdemands. In a highly competitive market, price isusually a determining factor between two competingproducts- especially when the products are consideredto be equivalent. If new project owners continue to relyon architects and contractors and existing ownersdevelop a greater understanding of certificationoptions, then more project owners may elect GBI overUSGBC as a better fit and more affordable certificationprovider.

REFERENCES

D'Antonio, P.C. (2006). Let the green-rating games begin.HPAC Engineering, September (2006), 13-14.

Green Building Initiative. (2010, October 14). Green building initiative: green globes. Retrieved fromhttp://www.thegbi.org/green-globes/.

Hampton, T.V. (2010, December 06). Green building thrivesin shaky economy. Engineering News-Record, 01-03.

Rodgers, J, Bowden, T, Malthouse, J, & ORourke, A.(Producer). (2010). Global ecolable monitor 2010. [Web].Retrieved from http://www.ecolabelindex.com/.

Smith, T.M., Fischlein, M., Suh, S., & Huelman, P. (2006).Green building rating systems: a comparison. University ofMinnesota, 29-46.

United States Green Building Council. (2010, October 14).U.S. green building council : leed. Retrieved fromhttp://www.usgbc.org/DisplayPage.aspx?CategoryID=19


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subcontractor Default insurance (sDi)Its Use, Costs, Advantages, Disadvantages and Impact on Project Participants

Dennis C. Bausman, PhD, FAIC, CPCClemson University

Keywords:subcontractor default insurance, surety bonds, risk management

INTRODUCTION

The value of non-residential construction in the UnitedStates is in excess of five hundred billion dollars (USCensus Bureau). For decades, contractor andsubcontractor surety bonds have been utilized on asignificant portion of this new work to transferconstruction related performance and payment risk to thesurety. A surety bond is a three party agreement wherebythe surety guarantees to one party, the owner or thecontractor, the performance (or payment) of anotherparty, the contractor or subcontractor respectively.Sureties prequalify firms prior to granting surety creditto reduce financial risk and to ensure that each contractorand subcontractor has the capacity and ability to perform.Surety bonds are typically required on federal, state andlocal government work and are quite common on large

multi-family and non-residential projects in the privatesector (McIntyre & Strischek 2005).

In the mid-nineties an alternative risk managementproduct for subcontractor performance was launched -Subcontractor Default Insurance (SDI). SDI is acatastrophic insurance policy that provides coverage tothe general contractor for the cost of subcontractor andsupplier default. Policies carry high deductibles, a co-pay layer, and per loss and aggregate limits for thecontractor. With SDI the contractor, not the insurer,prequalifies the subcontractors/suppliers and thecontractor has a level of flexibility and control torespond to subcontractor default not available withsurety bonds. With SDI, the contractor assumes greaterresponsibility and has more ‘skin in the game’, but iflosses are minimized the contractor can possibly reapfinancial benefits (Zurich 2007b).

Over the past decade SDI programs have grown tomore than 150 contractors using subcontractor defaultinsurance on some or all of their work (Zurich 2008a).

aBsTRaCT: A surety bond is a three party agreement whereby the surety guarantees to one party the performanceand/or payment of another party. Subcontractor surety bonds have a long history in U.S. construction and contractorscommonly utilize subcontractor surety bonds as a risk management tool for subcontractor payment and performanceprotection. In 1996, an alternative product for subcontractor bonding was introduced into the U.S. market – SubcontractorDefault Insurance (SDI). Zurich Insurance Company developed the original SDI product (SubGuard®) and remainsthe only insurer offering this type of coverage. SubGuard® is a two-party agreement between the contractor and theinsurer that provides the contractor catastrophic insurance coverage for the cost of subcontractor and supplier default.Unlike surety bonds, SDI is not first dollar coverage and policies are subject to high deductibles and a co-pay layer. WithSDI the contractor, not the insurer, prequalifies the subcontractors/suppliers and the contractor has a level of flexibilityand control to respond to subcontractor default not available with surety bonds. With SDI, the contractor assumes greaterresponsibility and has more ‘skin in the game’, but if losses are minimized the contractor has an opportunity to reapfinancial benefits. SubGuard® is a relatively new product with little more than a decade of use and loss history. As aresult, very little data evaluating its use and application is available. To address this void, a study was conducted toinvestigate SDI program particulars (features, use, cost, coverage, and loss history) and its advantages and disadvantagesas compared to subcontractor surety bonds.

Dennis C. Bausman currently serves as Professor and Endowed Faculty Chair in the Construction Science & Management (CSM) Department at Clemson University. He serves on the board of the American Institute of Constructors and is Editor of AIC’s JournalThe American Professional Constructor.

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With the possible exception of the sole insurer offeringSDI, little or no empirical data has been collected to: 1)evaluate its use, effectiveness, and cost or 2) permit acomparative analysis with traditional surety bonds.This study attempts to address both those needs.

SURETY INDUSTRY

History

A surety is a person or legal entity that agrees to beresponsible for the debt or obligation of another party.The first known suretyship contract dates back toetchings on a Mesopotamian clay tablet originatingaround 2750 BC. The oldest surviving written suretycontract is a Babylonian financial contract created in 670AD and the foundation for many of the currentprincipals of suretyship emanate from Roman lawdating back to 150 AD (McIntyre & Strischek 2005).

More than two millennia later, in 1880, the first suretycompany was established in the U.S. – the United StatesFidelity and Casualty Company of New York. Laterthat decade in 1884 the Heard Act became law. Thepurpose of this legislation was to protect taxpayersfrom contractor failure by requiring contractors onfederal construction projects to furnish surety bonds toassure project completion and payment ofsubcontractors and suppliers (McIntyre & Strischek2005). Bonding requirements were updated in 1935during the Great Depression era with the passage of theMiller Act. The Miller Act required separate paymentand performance bonds on federal constructionprojects. It established a bond threshold (minimumproject size) of $2,000 which was later increased to$25,000 in 1978. In 1994 the threshold was raised to$100,000 but the legislation retained paymentprotection for subcontractor and suppliers on federalprojects ranging from $25,000 to $100,000 (SFAA, 2008).In 1999 the Miller Act was amended to require the facevalue of the payment bond be equal to the contractprice on federal projects (Ramsey 2008).

Since the passage of the federal Miller Act, all 50 states,the District of Columbia, Puerto Rico, and most localjurisdictions have enacted ‘Little Miller Acts’ requiringsurety bonds on state and local public works projects(SFAA 2008, Korman et. al. 2007). Bonding thresholds varyamong the states, with the majority of such thresholds ator below the $100,000 federal minimum (SFAA 2008).

Underwriting

Sureties may typically be a subsidiary of a largeinsurance company, but the operational fundamentalsof surety underwriting differ widely from the carrier’sprimary insurance business. Conventional insurance isstructured to compensate the insured for unforeseenevents or loss (McIntyre & Strischek 2005). Theinsurance risk is largely underwritten based uponactuarial principles – a process whereby premiums aredetermined based upon projected losses, otherunderwriting costs, and desired profitability (Bruner &O’Connor 2008).

With surety bonds, the underwriter has no expectationof loss. Sureties view contractor failure or default asavoidable (McIntyre & Strischek 2005). As a result, theunderwriting process more closely resembles that usedwith the credit and lending industry. Surety’s make adecision to extend surety ‘credit’ on the behalf of acontractor or subcontractor based upon the firm’sability to meet the obligations of the underlyingcontract (Bruner & O’Connor 2008). To determinecapability and credit worthiness, sureties pre-qualifycontractors based upon a number of key indicatorsincluding financial strength, past performance, projectexpertise, and local experience. In addition, suretiesoften require personal guarantees and indemnificationfrom owners of the construction firm. They expect firmownership to be personally committed to the businessand reinforce that commitment by having some ‘skinin the game’ (Grant Thornton 2005, Ramsey 2005).

Advantages and Disadvantages of Surety Bonds

Advocates of surety bonds submit the primaryadvantages of subcontractor (and contractor)performance and payment bonds include: a) anindependent, third party prequalification by a suretywith detailed knowledge of the contractor’s financialstrength and capabilities, b) performance and paymentprotection, c) first dollar coverage extending to thecontract value, d) surety claim service in the event of adefault, and e) enhanced company ownershipcommitment because of surety requirements forpersonal and corporate indemnity (Nelson 2007b,Schubert and Duke 2002, SIO 2007a, SIO 2007b).

Criticism voiced regarding surety bonds generallyfocuses around two primary concerns: a) the length of

Subcontractor Default Insurance (SDI)

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time for surety response to a default, and b) the narrowperspective of the surety’s response (Gray 2002).

An often voiced criticism of subcontractor bonds is thelength of time required for the surety to initiate aremedy for the default of a subcontractor. Upon noticeof the principal’s default the surety has multipleindependent legal obligations to the obligee and to theprincipal. The surety is obligated to conduct a thoroughinvestigation to determine the extent of the principal’sliability and the legitimacy of the default which maytakes weeks or even months.

Once the surety has completed its investigation it hasthe authority to decide how to remedy a subcontractordefault in keeping with the terms of its bond obligation.The contractor may be consulted, but the ultimateresponse is at the discretion of the surety. Legal andbusiness considerations may dictate the surety’sresponse. The surety’s remedy may be formulated fromthe perspective of their principal (the subcontractor),and the remedy may not fully address the needs orconcerns of the contractor or the project (Gray 2002).

SUBCONTRACTOR DEFAULT INSURANCE (SDI)

Origination of SubGuardLargely because of the concerns that variouscontractors had with surety response to subcontractordefault, an alternative product was introduced into themarket in 1996 – Subcontractor Default Insurance.Subcontractor Default Insurance (SDI) is a catastrophicinsurance policy that provides coverage to the generalcontractor for the direct and indirect cost ofsubcontractor and supplier default. Zurich InsuranceCompany developed the original SDI product(SubGuard®) and other than a brief entry into the SDImarket by one other insurer in the late nineties, Zurichremains the only writer of subcontractor defaultinsurance (Higgins 2007).

Target Market and Market Share

Because of the added financial risk and programrequirements the targeted market for SubGuard® islarge commercial and industrial contractors that havean annual subcontract value of greater than $75 million– typically the Engineering News Record (ENR) Top400 (Zurich 2008b). Contractors suitable for theprogram are those who understand, accept, and are

able to manage the additional responsibility associatedwith a catastrophic loss insurance program. Theprogram is only suitable for firms that have theinstitutional knowledge, experience, andadministrative resources to effectively evaluate andprequalify subcontractors as well as the willingness andability to accept the financial risk inherent withinsurance coverage limited to catastrophic loss (Zurich2007a, Trethewey 2008). Since the first SubGuard®policy issued in 1996 the program has seen significantgrowth and penetration of its targeted market. As ofearly 2008, one hundred thirty-six (136) U.S. andCanadian contractors had a combined subcontractorand supplier enrolled value in excess of $35 billion.

Policy Coverage and Limits

SubGuard® is a two-party agreement between thecontractor and the insurance company (Zurich) thatprovides catastrophic loss protection for subcontractor(and supplier) default. The agreement (policy)purchased by the contractor provides coverage for boththe direct and indirect costs incurred to remedy asubcontractor default. Qualifying direct costs includethose that are incurred in fulfilling the defaultingsubcontractor’s contractual obligations regardingperformance or payment, correction of non-conformingwork, and the cost of attorneys and consultant feesincurred to remedy the default or in the defense of anydispute with the defaulted subcontractor. Indirect costscovered by the policy include delay damages,acceleration cost, and extended overhead. For coverageto be initiated the subcontractor must be formallydeclared in default, but need not be terminated (Nelson2007a, Zurich 2007a).

SubGuard® is not first dollar coverage but rather a typeof self-insurance providing coverage for catastrophicloss. The contractor is responsible for all costs up to thepolicy deductible. The deductible is negotiable, butnormally ranges from $350k to $2 million per loss(subcontractor default). Once the deductible is reachedthe co-pay layer applies to each loss. The co-pay layertypically ranges from 1 million to greater than $5million. Costs falling within the co-pay layer are sharedby the contractor and the carrier. Normally thecontractor’s portion is 20% of this layer (Nelson 2007a).For example, a contractor with a $500,000 deductibleand a 20% co-pay on the next $1,000,000 would be liablefor up to $700,000 for a single loss if costs resulting from


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the subcontractor default reached $1,500,000. TheSubGuard® program is structured to ensure that thecontractor has ‘skin in the game’ – a vested interest inminimizing loss.

Once the deductible and co-pay are satisfied (for eachoccurrence), Zurich is liable for any additional costs upto the single loss policy limit which can extend up to amaximum of $50 million per loss. Aggregate retentionand aggregate limits are applicable should there bemultiple defaults within a policy year. Withstandingthe policy limits, the aggregate retention is themaximum dollar risk retained by the contractor for apolicy year in the event of multiple defaults. It isnormally 3-5 times the deductible. The aggregate limitis the maximum exposure for the carrier (Zurich) andcurrently can range up to $150 million (Zurich 2008b).

Cost Structure

Contractor pricing of subcontractor default insurance(SDI) involves three primary components: a) a risktransfer premium paid to the insurer - Zurich, b) the costto manage subcontractor/supplier prequalification andclaims, and c) a loss sensitive premium to build up areserve fund for anticipated future claims (Higgins 2007).

With each annual renewal the contractor pays the insurera fixed risk transfer fee based upon the anticipatedsubcontractor/supplier enrollment volume for thatpolicy year. Its cost depends on a number of variablesinvolved in the carrier’s evaluation of the firm includingfinancial strength and stability, profitability and lossrecord as well as policy deductible, co-pay terms, andoccurrence and aggregate limits. The risk transferpremium paid the insurer generally approximates$3.50/$1000 (or .35%) of subcontract/purchase orderenrollment value (Higgins 2007).

The contractor’s cost to administer the program,perform the prequalification of subcontractor andsuppliers, and manage program claims is a programcost. However, contractor cost is often hard to quantifybecause often a portion, if not all, of the program dutiesare performed by existing management and staff. Inaddition, establishing an appropriate loss sensitivepremium for the contractor’s reserve pool is oftenproblematic because of the lack of adequate loss history(Higgins 2007).

Regardless, SDI is normally priced to the project ownerat, or slightly less, than a subcontractor surety bond

which normally averages 1% to 1.25% of thesubcontractor/supplier value. This would provide .65%to .90% of subcontract value for program administrationand claims – or possible cost savings to the contractor iflosses can be contained (Rowland 2000, Higgins 2007).A contractor may or may not make a project owneraware of the difference between the contractor’s pricingstructure for SDI and the project cost charged to theproject owner. Regardless, the owner’s cost will includethe contractor’s assumptions for the costs of programadministration and claims management.

Program Enrollment

With a subcontractor bond the surety prequalifies thesubcontractor. However, with SubGuard® the insurerprequalifies only the insured contractor for entry into,and continuing participation in, the SubGuardprogram. The general contractor has the responsibilityof prequalifying the individual subcontractors andsuppliers enrolled in the program. The contractor isgiven the latitude to determine which subcontractorsand suppliers to enroll (Gentile 2005).

Enrollment in the program can be by one of twomethods: 1) subcontractor or 2) project enrollment.Subcontractor enrollment places selectedsubcontractors in the program regardless of projectaffiliation. Project enrollment, the most commonmethod, enrolls subcontractors and suppliers on aproject specific basis. With project enrollmentsubcontractor/supplier coverage is associated with thepolicy year the project was enrolled in the SubGuardprogram, regardless of when the actual subcontractswere executed.

Claims Process

Coverage is triggered by the default of asubcontractor/supplier. The contractor documents thecosts incurred remedying the default, and inconsultation with the carrier, prepares the writtendocumentation needed to support the contractor’s loss.The burden is on the contractor to prove that it hascomplied with the terms and conditions of the policyfor a recoverable loss. The contractor’s ‘proof of loss’documentation is submitted to Zurich. Completion ofthe insurer’s review process and payment to thecontractor is normally completed within 30 days. Onlosses extending over a period of time in excess of 30days the contractor can submit and receive


49



multiple/interim payments. The contractor isreimbursed by the insurer only after the subcontractorbalance and policy deductible are expended (Zurich2003, 2007a, 2008b).

Coverage does not end at the expiration of a policy year.The policy can have up to a 10 year tail (Nelson 2007a).Submission of the ‘proof of loss’ documentation mustbe made the earlier of: a) the statute of repose, b)expiration of any right to seek recovery from thedefaulted party, or c) 10 years after substantialcompletion (Zurich 2003).

The advantages and disadvantages of SDI versussubcontractor surety bonds can depend on one’sperspective. The program has unique pros and cons,risks and rewards for each of the parties involved in theconstruction process. As a result, contractors,subcontractors, sub-subcontractors, suppliers, owners,and brokers have varying opinions on its application.

RESEARCH OBJECTIVE AND METHODOLOGY

Research Objective

SDI is a recently developed concept, and SubGuard® isa relatively new product with little more than a decadeof use and loss history. As a result, very little dataevaluating its use and application versus subcontractorsurety bonds is available – outside that collected by thesole insurer with an SDI program, Zurich.

Therefore, the primary purpose of this study is toinvestigate Subcontractor Default Insurance in order to:

• Define and identify the features of SDI, including policy coverage and exclusions.

• Identify the current use of SDI, including the number of contractors and premium volume.

• Differentiate SDI from subcontract surety bonds.

• Identify the advantages and disadvantages of SDI as compared to subcontractor surety bonds.

• Identify the direct and indirect costs associated with SDI.

• Investigate the loss history associated with SDI.

• Identify the issues and impacts that the use of SDI has on owners, contractors, and subcontractors.

• Identify direct or indirect constraints on SDI in public versus private construction markets.

Research Methodology

Survey Instrument: A self-administered survey wasdeveloped to obtain input from a sampling of eachstudy population using both closed-end and open-ended response options. The survey instrument wasdesigned using a Lickert scale for most of the closed-end responses and short answer or essay format forresponse to the open-ended questions.

The survey instrument was pilot tested and neededrefinements were incorporated. When completed, thesurvey instrument contained a total of 121 questionswith both closed and/or open-ended response options.A breakdown of the topics and the number of questionsfor each is as follows: company information (10), suretybonds (21), subcontractor default insurance (38), suretybond and SDI comparison (19), contractor SubGuardprogram experience (18), contact information andgeneral comments (3), and contractor reasons to rejectSDI (12).

Sample Selection: Data for this study was solicitedfrom general contractors, subcontractors, constructionmanagers, owners, and bond producers. A probabilisticsampling for each category was selected as follows:

General Contractors: All contractors listed in ENR’s2008 listing of the Top 400 Contractors with the majorityof their work in ‘General Building’ or ‘Industrial’ wereincluded in the sample. This was supplemented withDun & Bradstreet’s current listing of general contractorswith greater than 160 million annual volume.

Subcontractors: The sample included the members ofthe American Subcontractors Association (ASA) listedin its 2008 Membership Roster.

Owners: The sampling of owners included: a) the highest-ranking construction official within each State Department of Transportation (DOT), including the District of Columbia, b) all members of the Construction Owners Association of America (COAA) as listed in its 2008 Membership Listing, and c) a random sampling of the APPA-Leadership in Educational Facilities 2007-08 Membership Directory.

Bond Producers: The members of the National Association of Surety Bond Producers as recorded in its 2008 Membership Listing.

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sEPTEmBER 2011 — Volume 35, Number 02The American Institute of Constructors | 700 N. Fairfax St., Suite 510 | Alexandria, VA 22314 | Tel: 703.683.4999 | www.professionalconstructor.org


FINDINGS AND ANALYSIS

Statistical Testing andAnalysis and SurveyResponse Survey responseswere subjected to statisticalmeans testing using aconfidence level of 95%. T-tests with an σ = .05( a s s u m i n g u n e q u a lvariances) were conductedbetween selected samplesof the respondent groups. In the following pages thefindings and analysis are presented for each of the fourrespondent groups: a) CM/GC’s, b) subcontractors, c)bond producers and sureties, and d) owners.

As of the cutoff date for the survey four hundred six(406) usable responses were received. The distributionof response is shown in Table 1.

Respondent Characteristics and Program Experience

Construction Managers at Risk and GeneralContractors (CM/GC): Seventy-nine (79) usableresponses were received from contractors (constructionmanagers at risk and general contractors). Seventy-twopercent (72.2%) of the contractor respondents hadexperience with SDI (SubGuard®). Another sixteenpercent (16.5%) had evaluated SubGuard® but decidednot to participate in the program. The annual volumeof contractors with SDI program experience rangedfrom $115 million (m) to $7 billion (b) with an averageof $1,269m. The annual volume of contractors with noSDI experience ranged from $15m to $4b with anaverage of 585m. Contractors with a SubGuard®program have a statistically significant larger annualvolume than those without SDI experience. Themajority of the contractors with a SDI program operateon a regional or national basis (36.8% and 35.1%respectively). The remaining firms are evenlydistributed between a local, statewide, or global area ofoperation. The distribution is similar for contractorswithout a SubGuard® program.

Subcontractors: One hundred sixteen (116) usableresponses were received from subcontractors. Theannual volume of subcontractors with SDI program

experience ranged from $100k to $850 million (m) withan average of $46.0m. The annual volume ofsubcontractors with no SDI experience ranged from$700k to $400m with an average of $32.3m. When theoutliers for each group are excluded, the averageannual volume is $28.1m and $11.5m respectively.Excluding the outliers, the annual volume ofsubcontractors with SDI experience is significantlylarger than subcontractors without SDI experience.

Sixty percent (60%) of the subcontractor respondents hadexperience with, or knowledge of, SubGuard®. Theresponse distribution included forty-two percent (42%)with previous and/or current enrollment in a SubGuard®program, sixteen percent (16%) with SDI knowledge, andforty-one percent (41%) with no SDI experience orprogram knowledge. Most subcontractors (77%) withdirect program experience, had their initial enrollmentsince 2004 and almost half (49%) were first exposed toSubGuard® within the past 3 years.

Bond Producers: One hundred thirty (130) usableresponses were received from bond producers andthirty-two (32) from surety representatives. Two-thirds(67%) of the bond producers responding to the surveyhad direct experience with SDI. SubGuard® had beenused on some or all of their clients’ projects. Almosthalf, (47%) were exposed to, or started offering, SDIprior to 2000. Greater than ninety percent (90%) ofthese bond producers had more than four years ofexperience with the product. Combined, therespondents had an average of seven years ofexperience with SDI. The clients of bond producers hadan average annual SDI subcontractor enrollmentranging from 2% to 100% with a mean value of 34%. Amajority of the bond producer respondents indicatedthat the use of SDI was stable or expanding. As shownin Figure 8: SDI Program Status, 76.4% of therespondents with SDI experience indicated thatenrollment in SDI was increasing or stable.Approximately seventeen percent (16.7%) had reducedenrollment and only 6.9% no longer participated in theSubGuard® program.

Owners (Public and Institution, Private, andGovernmental Agencies): Survey response fromowners was very limited, possibly because of lack ofinterest or knowledge of surety bonds and/orsubcontractor default insurance. Several of therespondents from governmental agencies noted that the

Table 1: Survey Response

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prime contractor was normally bonded, but they didnot require subcontractor bonding - that was acontractor decision.

Owners’ knowledge of, or requirement for,subcontractor bonding was limited. Two-thirds of therespondents (65%) indicated that they either did nothave any bonded subcontractors on their project(s) ordidn’t know if they had any. Forty percent (40%) didnot know the average subcontractor bonding rate.Subcontractor bonding was typically required by only10% of the governmental agencies, 29% of the publicinstitutions and universities, and 30% of the privateowners. Collectively, eighty percent (80%) of the ownerrespondents did not require subcontractors to bebonded on their projects. In practice, the federalgovernment and most all of the states do not requiresubcontractors to be bonded, but that does not preventcontractors from bonding any, or all, of thesubcontractors on their work. In addition, only 20% ofthe respondents had experience with subcontractordefault insurance.

SUMMARY OF FINDINGS AND CONCLUSIONS

To enhance and refine research methodology,questionnaire development and data collection, a totalof thirty-five (35) personal interviews were conductedwith industry professionals during the course of thisstudy. Interviewees included bond producers (6),attorneys and associations (5), subcontractors (3),contractors (18), and the SDI insurer (3). The interviewswere focused on the themes of this study and typicallylasted from 45 minutes to 1½ hours. These discussions,along with the comparative analysis of the statisticalfindings for each respondent group revealed both areasof agreement and disagreement regarding SDI andsubcontractor surety bonds. The disparity is oftenbased upon respondent perspective, subjectknowledge, or experience regarding surety bonds andsubcontractor default insurance. However, despite thedifferences there are a number of areas where centralthemes emerged and reasonable conclusions could bedrawn from the data collected - especially whenlimiting the analysis to respondents knowledgeable ofboth risk management products. Within that context,the following is a summary of the findings andconclusions. Central themes and substantiveconclusions are presented for each major category of

this study: a) subcontractor prequalification, b)subcontractor default response, c) cost, pricing andcoverage, d) risk management, and e) subcontractorparticipation. Tables presenting the statistical resultsthat provide support for these conclusions are locatedin the Appendix.

General SubGuard® is not appropriate for every contractor.SubGuard® is a risk management insurance programtargeted at large commercial general buildingcontractors with an annual subcontracted value of $75million or greater and the program is not appropriatefor every contractor. Candidates need a large annualvolume and the financial strength, managementexpertise, and willingness to accept the inherentfinancial risk associated with a catastrophic insuranceprogram for subcontractor default. Contractors meetingthese criteria are a relatively small group of thepopulation of all U.S. builders. However, consideringthe program restrictions, SubGuard® has receivedwidespread acceptance within its targeted market.Since its inception in 1996, SubGuard® has grown to acurrent market penetration of approximately onehundred thirty-five (135) U.S. contractors with acombined annual enrollment in excess of $35 billion ofsubcontractor value.

SubGuard® is not appropriate for use on every projector with every subcontractor. Subcontractor enrollmentfor contractors with SubGuard® programs ranges from5% to 100% of annual subcontractor value with anaverage enrollment of 56%. Only fourteen percent ofthe SDI contractors participating in this study hadsubcontractor enrollment of 90% or more. SubGuard®use depends upon perceived risk. Program use is oftenpredicated on four primary considerations: a)contractor selection, b) contract type, c) project type,and d) owner acceptance. Most SDI contractors preferto use SubGuard in a project environment where thecontractor is selected based on qualifications, and notjust price. These tend to be negotiated projects in theprivate sector where the contractor has the flexibility toselect and control subcontractor participation.Subcontractors unknown to the firm or not meeting itsprequalification standards are typically not enrolled inthe program. To mitigate the firm’s risk, SubGuard®use is often limited to project types and thegeographical range of the firm’s prior experience. In

52


addition, program use is subject to owner acceptanceof this risk management approach and the contractor’spricing structure. SDI contractors typically do not viewSubGuard as a universal risk management tool. Ratherthey utilize the program when project variables andsubcontractor participation pose an acceptable level ofproject risk and program application.

Subcontractor Prequalification(See Table 2 in the Appendix)

Surety (3rd party) prequalification of subcontractorsis an advantage of surety bonds. Surety subcontractorprequalification is viewed by contractors,subcontractors and bond producers as a worthyindicator of subcontractor capability and capacity. SDIcontractors value the surety’s knowledge andevaluation of the performance and payment risk of asubcontractor.

Subcontractor ‘bondability’ is typically a prerequisitefor enrollment in SubGuard®. Most SDI contractorsprefer or require subcontractors enrolled in theirSubGuard® program to have the capability and capacityto furnish a bond. They typically require a SunshineLetter as an indication of the subcontractor’s ability tofurnish a surety bond.

Bond producers are willing to provide ‘SunshineLetters’ for subcontractors on SDI projects. A majority(61%) of bond producers indicated that they werereluctant to provide Sunshine Letters for subcontractorson SDI projects. However, this does not appear to besupported in practice. Only a third of subcontractors(33%) and a fifth of SDI contractors (20%) indicated thatbond producers were reluctant to provide evidence ofsubcontractor bondability on projects with a SDIprogram. Bond producers may not want to furnish‘Sunshine Letters’, but they are typically providing thisservice on SDI projects.

Contractors with SubGuard programs have the abilityto adequately prequalify subcontractors. Bondproducers and subcontractors submit that sureties havebetter access to subcontractor financial information andalso have greater skill to establish project and aggregatebond limits. However, bond producers are the onlygroup that claims sureties are more capable toprequalify subcontractors. That, coupled with the loss

history of SDI contractors (more than two-thirds havehad one or fewer claims since the inception of theirprogram), lends support for this conclusion.

The SDI prequalification process is invasive and is anadministrative burden on the subcontractor. SDIcontractors do not support this conclusion, butapproximately three-quarters of the subcontractorsexposed to the process (and a majority of the bondproducers) judge the process to be invasive and anadministrative burden. Similarly, eighty-four percent(84%) of subcontractors claim that the process requiresthe sharing of sensitive financial information that theyfeel may be misused or misinterpreted.

Contractors typically have a policy to protect theprivacy of subcontractor information. Subcontractorsare ‘neutral’ on this matter, but ninety-one percent ofthe contractors with a SDI program assert thatcontractors have a policy to protect the privacy of thesubcontractor’s information. Even a majority of bondproducers support the position of the contractors.

Subcontractor Default Response (See Table 3 in the Appendix)

Sureties typically do not execute subcontractordefault remedies that minimize project delay orproject cost for the owner and/or contractor.Approximately 87% of the SDI contractors share thisopinion. Even amongst non-SDI contractors, less than10% of the firms believe that sureties are responsive andexecute a remedy that minimizes project cost and delay.Contractors are not satisfied with surety response tosubcontractor default. As a group, subcontractors arestatistically neutral on these issues. However, a deeperevaluation of subcontractor response reveals that lessthan a third (31%) believe that the surety remedyminimizes project delay and only a fifth (21%) assertthat surety response generally minimizesowner/contractor cost. Bond producers are neutralregarding this matter. They neither agree nor disagreewith the statement(s) that sureties typically execute adefault remedy that minimizes project delay and cost. Surety subcontractor default response typically doesnot address the needs and concerns of the contractor. Asignificant majority of all contractors (78%) and eighty-eight percent (88%) of those contractors with a SDIprogram share this opinion. Perceived lack of surety


53


response was actually the genesis of the SubGuard®

program. Dissatisfaction with surety response tosubcontractor default was an important considerationfor 82% of the contractors that decided to initiate aSubGuard® program.

SDI provides the contractor greater control andflexibility to manage subcontractor default.Contractors, bond producers, and owners agree withthis assertion. These three groups also submit thatcontractor control was an important consideration inthe decision to use SubGuard®.

In the event of subcontractor default, SDI improvesthe contractor’s ability to complete a project on timeand within budget. A significant majority of SDIcontractors assert that in the event of subcontractordefault, SDI improves their ability to complete a projecton time (89%) and within budget (78%). None of theparties disagree with these assertions. Bond producersand owners support the assertion that SDI improves acontractor’s ability to complete on time.

Cost, Pricing & Coverage(See Table 4 in the Appendix)

Possible cost savings to the contractor is a significantcontractor incentive influencing SDI’s use (all parties agree).

SDI is priced to project owners at, or slightly less,than subcontractor surety bonds.

Payment Protection for suppliers and 2nd tiersubcontractors is an advantage of subcontractorsurety bonds (all parties agree).

Data regarding coverage limits and length of coverage(tail) is inconclusive. Contractors assert that SDIprovides better coverage limits and duration ofcoverage for a defaulted subcontractor. Bondproducers, another group in a position toknowledgably assess coverage and risk, are indisagreement with the contractors’ assessment.

In practice, SubGuard® and surety bond terms andconditions vary, often in response to the legal orregulatory constraints applicable to the project.However, there are some common differences. WithSDI, subcontractor coverage extends to the occurrence

and aggregate limits of the contractor’s policy. Theselimits are typically in excess of the coverage affordedby a surety bond (which is typically 200% of the valueof the subcontract work) except on large subcontractsapproaching the firm’s policy limits. In addition, thelength of coverage subsequent to project completion isoften longer with SubGuard®. Standard SubGuard®

policy terms extend coverage to 10 years or the statuteof limitations (whichever is less) whereas surety bondcoverage is often limited to a period of 1 to 2 years afterproject completion.

Most owners do not understand the advantages anddisadvantages of SDI (all but contractors agree).

SDI has an impact on the Owner’s risk. Even thoughmost owners may not understand the risk implicationsof SubGuard®, the program can have an impact on theirlevel of project risk. The degree of impact, and whetherit is positive or negative, depends on project conditionsand contractor solvency.

If the general contractor maintains solvency the impactof SDI can be favorable on two counts: cost andresponse to the event. SubGuard® is typically priced at,or slightly less, than surety bonds so there may be aproject cost savings to the owner. In addition, SDIprovides contractor control regarding response to poorsubcontractor performance and default. Thecontractor’s ability to directly manage subcontractordefault, if properly executed, can improve thetimeliness and effectiveness of response to mitigate thenegative impact on project cost and completion time.With SDI, 2nd tier subcontractors and suppliers do nothave the payment protection of a surety bond, butretain their lien rights on private work and can file aclaim against the property.

In the event of contractor insolvency, owner risk can benegatively impacted by the use of SDI. The degree ofimpact largely depends on whether or not thecontractor was bonded. If the owner required acontractor payment and performance bond, theowner’s risk is limited because the surety would berequired to fulfill the contractor’s contractualobligations. Under this condition, whether thesubcontractors were bonded or enrolled in aSubGuard® program may have minimal impact. Thecontractor’s surety would be assuming the risk.


54



However, in the absence of a prime contractor suretybond, the owner would be assuming the payment andperformance risk of the contractor. In that case if theowner obtained ‘financial interest endorsement’ fromthe SubGuard® insurer the owner’s risk would belimited to the terms and conditions of the contractor’spolicy. In the event of subcontractor default, policydeductible(s) and coverage limits would apply to theowner. With SubGuard®, the owner would not have the1st dollar coverage provided with subcontractor suretybonds. Without ‘financial endorsement certificates’ theowner’s financial exposure could extend to all of theadditional cost and delay caused by the contractor andsubcontractor(s) default.

Risk Management(See Table 5 in the Appendix)

SDI provides an incentive for the contractor toimprove its subcontractor prequalification process.Subcontractors are neutral on this issue, but asignificant majority of contractors (93%) support thisassertion. In addition, almost three quarters of the bondproducers (74%) agree.

Contractors using SDI have the ability to moreproactively manage poor subcontractor performance(supported by CM/GC’s and bond producers).

SDI encourages contractors to become bettermanagers of subcontractor risk (supported byCM/GC’s and bond producers). The majority of SDIcontractors interviewed submit that their subcontractorprequalification process evaluates both thesubcontractor’s operational capabilities and financialstrength. Most believe their process equals or exceedsthe surety’s prequalification process. SDI contractorshave ‘skin in the game’ and as a result often take a moreactive role in evaluating and managing subcontractorrisk.

SDI affords a defaulted subcontractor little leverageor recourse except through litigation. Subcontractors(the party that can be placed in default) and bondproducers support this assertion. A majority of SDIcontractors disagree with this conclusion. SDIcontractors (and Zurich) that were interviewed claimedthat the majority of their subcontractor defaults weredue to subcontractor insolvency.

The lack of legal precedence does not discourage theuse of SDI. SDI contractors and bond producers submitthat the lack of legal precedence does not discouragethe use of SDI.

SDI is not a substitute for statutory bondrequirements required of prime contractors:Subcontractors and bond producers do not think thatSDI complies with the claim rights and paymentprotection intent of the Federal Miller Act on publicwork while contractors and owners are neutral on thismatter. However, The Miller Act only addresses generalcontractor bonding on federally funded work. It issilent regarding subcontractor bonds. SubGuard® is notintended to be a substitute for a general contractorbond and as a result, the use of SubGuard® does notviolate the requirements of the Federal Miller Act.

Use of SDI on federally funded projects can poselegal concerns/liability regarding the False ClaimsAct. Contractors submit that SDI does not pose a FalseClaims Act liability on federal work and only 26% ofbond producers assert that SDI’s use poses a liability.Both bond producers and subcontractors arestatistically neutral on this issue. During the personalinterviews most participants indicated that SubGuard®does pose a liability on negotiated and change orderwork on federal contracts unless there is priordisclosure and a pricing agreement reached with theproper government authorities.

Subcontractor Participation(See Table 6 in the Appendix)

Enrollment in a SDI program impacts a subcontractor’sbonding capacity. Contractors do not support this positionand subcontractors are neutral. However, bond producerswho are in a better position to assess the impact of SDIenrollment support this assertion.

SDI does not create a disincentive to usesubcontractors or vendors not already enrolled. Bothcontractors and bond producers support this position. SDI encourages the use of small and minoritysubcontractors that cannot obtain bonding (supportedby CM/GC’s and subcontractors).

Most subcontractors would rather furnish a bondthan be enrolled in SDI. Contractors do not share thisopinion, but both subcontractors and bond producerssupport this conclusion.

55



Recommendations

The data obtained from this study provided valuableinsight and perspective from contractors,subcontractors, bond producers and owners regardingsubcontractor surety bonds and subcontractor defaultinsurance. However, additional study is warranted toinvestigate: a) an apparent contradiction in thefindings, and b) an area of importance where the surveydata was inconclusive. In addition, a follow-up studyis recommended to investigate performance of the SDIprogram during adverse economic conditions.

One of the findings of this study was that “SDIencourages the use of small and minoritysubcontractors that cannot obtain bonding.” Thiswould indicate that SDI contractors are typicallywilling to self-insure small and minority contractorsthat cannot obtain bonding. This deliberate risk choiceis not consistent with the risk management approachtypified by the SDI contractors involved in this study.In addition, it appears to be in conflict with anotherfinding of this research effort: “Subcontractor‘bondability’ is typically a prerequisite for enrollmentin SubGuard®.” Additional investigation is warrantedto determine if the use of SDI universally encouragesthe use of small and minority subcontractors or rather,is limited to an effective tool to temper subcontractorrisk when small and/or minority participation is acontractual requirement for the contractor.

Comparative data regarding coverage limits and lengthof coverage (tail) for SDI and subcontractor suretybonds was inconclusive. Risk coverage and terms werenot a primary focus of this study. However, these areimportant risk management considerations anddeserve investigation.

Much of the opinion data and most all of the SDIprogram loss history were collected from, or during, aperiod of expanding construction activity. Theeconomic recession starting in late 2008 and thecorresponding reduction in construction activity haveelevated the risk of subcontractor default and financialfailure. It would be appropriate to conduct a futurestudy to evaluate and compare the findings of thisresearch effort with program performance and SDIcontractor program loss history during a recessionaryperiod.

REFERENCES

Bruner, Philip L. and Patrick J. O’Connor (2008), What is Insurance? Surety Contracts Distinguished fromInsurance Contracts, Westlaw, BOCL 11.4

Gentile, Melinda (2005), Subcontractor Default InsurancePolicies – An Alternative to Performance Bonds? Southeast Construction, Law/Courtroom, December 2005

Grant Thornton (2005), Grant Thornton LLP’s 2005 SuretyCredit Survey for Construction Contractors: The BondProducer’s Perspective, Grant Thornton LLP, Chicago IL

Gray, Terry (2002), Point/Counterpoint: Default Insurance –An Alternative to Traditional Surety Bonds, ConstructionLawyer, Winter 2002, Westlaw, 22-WTR Construction Law. 17

Higgins, James (2007), Subcontractor Default Insurance,Insurance Journal, January 8, 2007,www.insurancejournal.com/magazines/midwest/2007/01/08/features/76235.htm

Korman, Richard & E. Michael Powers, Angelie Bergeron,Joe Florkowski, Tony Illia, and Eileen Schwartz (2007),Bond Firm Profits are Rising Fast as Sureties Climb Out ofthe Hole, Engineering News Record, 1/29/07

McIntyre, Marla and Dev Strischek (2005), Surety Bondingin Today’s Construction Market: Changing Times forContractors, Bankers, and Sureties, The RMA Journal, May 2005

Nelson, Steve (2007), Managing the Risk of SubcontractorDefaults: Subcontractor Bonds and Other Alternatives, 20thAnnual Construction Law Conference, State Bar of Texas,San Antonio TX, March 1, 2007

Nelson, Steve, (2007b), The Yin & Yang of Subcontract RiskManagement, SureTec Information Systems,

Ramsey, Marc (2005), Surety Bonding 2005 MarketOverview, Construction Executive, Associated Builders andContractors, November 2005, Arlington VA

Rowland, Todd (2000), Contractor Default Insurance: ABond Alternative, 20th IRMI Construction Risk Conference,www.IRMI.com

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Schubert, Lynn M, and Robert J. Duke (2002),Point/Counterpoint: Surety Bonds – The Best Protection Against Contractor or Subcontractor Default, American BarAssociation, Westlaw, 22-WTR Construction Law. 22

Surety Information Office (SIO) 2007a, SubcontractorPayment Rights Not Protected Under Default InsurancePolicies, Surety News Bulletin, Surety Information Office,Washington DC

Surety Information Office (SIO) 2007b, Why ContractorsFail, Modern Contractor Solutions, October 2007

Surety & Fidelity Association of America (SFAA) (2008),www.surety.org/GovRel/StateBondThresholds.pdf

Trethewey, Scott (2008), Associated Builders andContractors East Coast Chapter, Construction ExecutiveSeminar Series Presentation, May 2008,http://www.abceastflorida.com/wmspage.cfm?parm1=1571

US Census Bureau (2008),http://www.census.gov/compendia/statab/index.html

Zurich American Insurance Company (2003), ‘Standard’SubGuard Policy, STF-GL-10055-(CW) 11/03

Zurich American Insurance Company (2007a), Subguard –Product Overview Presentation, Zurich in North America,January 2007

Zurich American Insurance Company (2007b), In Your BestInterest: SubGuard promoting on-time, on-budget projects at areasonable cost, Minneapolis, MN

Zurich North America (2008a), Construction – SubGuard, www.zurichna.com/zus/zaource.nsf/display?openform&id=98

Zurich North America (2008b), SubGuard: What if contractorscould effectively manage the risk of subcontractor or supplierdefault? Zurich, Minneapolis, MN

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Table 2: Subcontractor PrequalificationRespondents with SDI Experience

appendix

Table 3: Subcontractor Default ResponseRespondents with SDI Experience

58


Table 4: SDI Cost & Pricing, Coverage and SatisfactionRespondents with SDI Experience

appendix

59


Table 5: Risk ManagementRespondents with SDI Experience

appendix

Table 6: Subcontractor Project ParticipationRespondents with SDI Experience

60

The American Institute of Constructors

Reviewer/Publication Interest SurveyThe American Professional Constructor is a refereed journal published two times a year by the American Institute ofConstructors (AIC). Each author’s manuscript submission is given a blind review by three AIC members. to evaluate the contentand style, and appropriateness as either a general interest or scholarly publication. Based upon the decision of the reviewers,each article is accepted or rejected for publication. Acceptance can be predicated upon incorporation of reviewer comments.

Approximately 10-15 articles are published annually in The American Professional Constructor. To maintain our highstandards of publication, AIC requires the support of competent and committed reviewers. We would like to express ourdeep gratitude to the following reviewers of the articles published in the Journal’s Spring and Fall 2011 Issues:

Ryan Abbott, Heber Arch, Scott Arias, Bernard Ashyk, Eric Bartholomew, David Bierlein, David Bilbo, Richard Boser,Steve Byrne, Paul Byrne, James Caldwell, Joseph Cecere, Joseph DiGeronimo, Mark Federle, Mark Giorgi, Mike Golden,Frederick Gould, Merlin Kirschenman, Roger Liska, Tanya Matthews, Paul Mattingly, Hoyt Monroe, Bradley Monson,Seth O’Brien, Chris Piper, Jens Pohl, Randy Rapp, Wayne Reiter, Thomas Smithey, M.G. Syal.

We are always looking for additional industry professionals that are interested in serving on our review board. To helpensure reviewers continue to be selected based upon competency and interest, we ask that prospective reviewers take a fewminutes to complete the survey below. The reviewer survey and manuscripts for publication consideration should besubmitted to:

Dennis C Bausman, FAIC, CPC, PhD

Editor, The American Professional Constructor

Clemson University

133 Lee Hall

Clemson, SC 29634-0001

Work Phone: (864) 656-3919

Email: [email protected]

Fax (864) 656-7542

Please place a mark beside each keyword that is a topic area indicating your expertise or interest. Thank you, in advance, for serving as a reviewer for The American Professional Constructor.

Name: ______________________________________________________ Member No.: __________________________________

E-Mail: ______________________________________________________ Phone No.: ____________________________________

Address: ___________________________________________________________________________________________________

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Topic Areas

� Computer Applications

� Construction Safety

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� Financial Management

� Personnel/Human ResourceManagement

� Contract Law and Legal Applications

� Materials and Methods

� Project Management

� Steel Construction

� Concrete Construction

� Design-Build Construction

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American institute of Constructors

Constructor Code of Ethics

The Construction Profession is based upon a system of technical competence, management excellence

and fair dealing in undertaking complex works to serve the public safety, efficiency, and economy.

The members of the American Institute of Constructor are committed to the following standards of

professional conduct:

I. A Constructor shall have full regard to the public interest in fulfilling his or her responsibilities to

the employer or client.

II. A Constructor shall not engage in any deceptive practice, or in any practice which creates an unfair

advantage for the Constructor or another.

III. A Constructor shall not maliciously or recklessly injure or attempt to injure, whether directly or

indirectly, the professional reputation of others.

IV. A Constructor shall ensure that when providing a service which includes advice, such advice

shall be fair and unbiased.

V. A Constructor shall not divulge to any person, firm, or company, information of a confidential

nature acquired during the course of professional activities.

VI. A Constructor shall carry out responsibilities in accordance with current professional practice,

so far as it lies within his or her power.

VII. A Constructor shall keep informed of new thought and development in the construc-tion process

appropriate to the type and level of his or her responsibilities and shall support research and

the educational processes associated with the construction

61

Why Become Certified?

Benefits to the Constructor

• Provides an internationally recognized certification of construction management skills and knowledge. • Provides an analysis of individual strengths and weaknesses in the subject areas tested. • Enhances the Constructor image as a professional to their employer, their clients, and the public. • Provides a marketable credential that sets you apart.

Benefits to the Employer

• Provides an independent assessment of an employee’s skills and knowledge, based on a comprehensive national standard. • Provides a recognized credentialing within your company that improves marketability to clients. • Provides assurance that employee will continue to hone their skills, through the required Continuing Professional Development

program.

Benefits to Owners:

• An increased level of assurance that their projects will be managed more effectively. • Could use the qualification as a means to prequalify contractors • Knowledge that their contractor management team will be more professional.

Click to view our nationwide testing locations: http://goo.gl/ztnLC

Visit www.professionalconstructor.org or email [email protected] for more information.

The Constructor Certification Commission

“Building the Professional Constructor”

Take the next step in your career, become a Certified Professional Constructor!

Join the over 12,000 professionals who have sought the Certified Professional Constructor (CPC) and Associate Constructor (AC) designations.

Mark your calendars for our next examination on November 5, 2011. Online registration will open on July 15th, more information regarding registration and certification can be found at www.professionalconstructor.org.

Candidate handbooks are available upon request, email [email protected] to request yours. Upon registration candidates can download the digital PDF study guide.

Examination Fees

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